My right honourable friend the Financial Secretary to the Treasury (Stephen Timms) has made the following Written Ministerial Statement.

Avoidance schemes have been notified to Her Majesty's Revenue and Customs (HMRC) that exploit provisions under which individuals may claim relief for interest payments on loans used to invest in partnerships or small companies. Legislation will be introduced in the forthcoming Finance Bill to stop individuals exploiting these provisions for the purposes of tax avoidance. In future, interest will not be eligible for tax relief if it is paid as part of arrangements where the deductibility of the interest means that the investor is guaranteed to make a profit.

The legislation, which will be effective in relation to interest paid on or after today, will not catch genuine commercial investments in business where there is uncertainty as to the return that will be produced from the investment.

A copy of the draft legislation together with draft Explanatory Notes will be published shortly on HMRC’s website.