This measure, announced in the Budget Red Book, came into force immediately on 30 October and will amend section 455 loans to participators anti-avoidance legislation in Corporation Tax Act 2010 to prevent close companies recycling loans through two or more companies to avoid tax.

The change will affect participators in close companies that undertake tax avoidance arrangements, HMRC said. It removes opportunities for avoidance of the s455 tax charge on loans and benefits for participators that exploit the current mechanics of the anti-avoidance rule.

This will also bring the targeted anti-avoidance rule (TAAR) within the loans to participators regime in line with other TAARs.