The government is taking action to stop people avoiding tax by using rules known as compensating adjustments.
The rules, which are designed to avoid double taxation between individuals and connected companies, are increasingly being used by individuals to reduce their income tax bill.
The government will change the law to remove this avoidance opportunity, following a period of informal consultation on the technical detail in this discussion document.
This technical discussion document follows the Chief Secretary to the Treasury Danny Alexander’s announcement on Tuesday 17 September concerning proposals to reduce tax avoidance involving ‘compensating adjustments’ in the transfer pricing code.