The Chief Secretary to the Treasury, Danny Alexander, made two announcements on government action against tax avoidance and evasion in his speech to the Liberal Democrat party conference yesterday, including controversial moves to change the tax treatment of loans made by private equity partnerships.

The first concerns the use of the rules on compensating adjustments, which are designed to avoid double taxation between individuals and connected companies, but which the government says are increasingly being used by individuals to reduce their income tax bill.

HMRC maintains these are being exploited in two areas. In the first, partnerships pay companies for services at cost price and use the tax rules to create a mark-up which is not actually paid, but which reduces the bill of individual partners.

In the second type of case, individuals lend money to a company in which they are a shareholder, charging excessive interest payments on which they do not pay full income tax.

In his speech to the party conference, Alexander said: 'We are cutting corporation tax to encourage firms to invest. But not to give the wealthy a way to avoid the 45p income tax rate. It is why I can announce today that following a brief consultation we will be closing the loophole that allows private equity shareholders to siphon money out of their firms while dodging the intended income tax.'

Alexander went on to say: 'And it's why I can also announce that we will also be closing the loophole that allows partners in partnerships to structure their staff arrangements so that they avoid the correct amount of income tax. It's wrong, it's unfair, and it's got to stop.'

The British Venture Capital Association (BVCA) said the tax treatment of loans that private equity partners make to their companies is 'down to legitimate commercial logic, not "avoidance".'

In its statement, the BVCA said: 'This matter which Danny Alexander refers to today is not a "loophole" as reported in some quarters but a well established set of rules. These are straightforward commercial transactions - they are not structures designed to enable individuals to avoid tax. It is strange then to hear them entering the public arena in the language of newly discovered tax avoidance. This is party conference politics, pure and simple.'

Separately, HMRC is to launch a campaign targeting landlords who are failing to pay the tax due on rents they receive on their properties, after its estimates suggest up to 1.5m landlords may have underpaid or failed to pay up to £500m in tax in 2009 to 2010.

While campaign will target all landlords, HMRC says it will be focussing compliance activity into specific categories, including those who own more than one property, specialist landlords who rent to students, people with holiday lets and those who let houses in multiple occupation.

The campaign will give landlords who owe tax the opportunity to come forward voluntarily to put their tax affairs in order. If they do not do this and are then subject to an HMRC investigation, they will incur bigger penalties and could face criminal proceedings.