The change in law, which will come into effect immediately, was announced this week by Exchequer Secretary to the Treasury, David Gauke.
Post-cessation trade relief allows a person to claim a deduction in their income tax calculation for certain payments and bad debts arising after a trade, profession or vocation has ceased. The avoidance scheme being blocked by the Government today would involve individuals artificially exploiting the relief to claim a tax deduction.
The Government's action is being taken to address the risk of significant losses to the Exchequer as a result of the avoidance scheme. Further detail on the change is available on the HM Revenue & Customs (HMRC) website.
David Gauke said: "Tackling tax avoidance is a priority for the Government. It is unacceptable, at a time when we are trying to bring down the deficit, that there are those who try to avoid paying the tax they owe. We have acted quickly to prevent the use of this particular scheme and we will not hesitate to close down other avoidance schemes as we become aware of them."
The legislation will be in the 2012 Finance Bill. The draft legislation, together with an Explanatory Note and Tax Information and Impact Note, can be found on the HMRC website in the "What's new" section: http://www.hmrc.gov.uk/news/index.htm