Government has announced the immediate closure of an avoidance scheme marketed as a way for companies to artificially reduce their corporation tax bills.

HMRC recently become aware of the scheme which sought to generate artificial loss relief from a property business. The scheme intended to allow users of the scheme to offset losses or certain types of expenditure against their corporation tax profits.

HM Treasury described the scheme as a 'wholly artificial arrangement set up for no other purpose than to avoid tax'.

It said it expects the new legislation, which came into effect on Friday, to protect the Exchequer from the potential losses of tens of millions of pounds. In addition, HMRC is set to challenge any attempts made to use the scheme before the new rules which came into effect.

Exchequer Secretary David Gauke said that the government has made it very clear that it will not put up with tax avoidance which 'uses artificial structures to aggressively exploit rules contrary to parliament's intended purpose.'

'Within days of HMRC being notified of the existence of this scheme we took decisive steps to shut it down once and for all. The vast majority of people and businesses in the UK pay what they owe but a minority try to dodge their taxes by getting involved in contrived and artificial avoidance schemes. We have made significant investment in HMRC to pursue tax-dodgers and collect an additional £9bn by 2014,' said Gauke.

Next year government will introduce a new General Anti-Abuse Rule (GAAR) next year, which will provide additional, general protection for the Exchequer against abusive arrangements of this kind.

The new legislation will be published within the 2013 Finance Bill.