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HM Revenue & Customs (HMRC) has introduced new legislation to block a scheme involving post-cessation trade relief, with immediate effect.

Post-cessation trade relief allows individuals to claim a deduction in their income tax calculations for certain costs and bad debts after a trade, profession or vocation has ceased.

HMRC has highlighted an avoidance scheme which involves individuals artificially exploiting the relief in order to claim a tax deduction.

David Gauke, Exchequer Secretary to the Treasury, announced that the new legislation would prevent the relief from being available where a main purpose of the arrangements is to obtain a reduction in tax.

The legislation supporting the change will be included in the 2012 Finance Bill.

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