The government told the European Commission yesterday that it would phase out controversial tax-breaks for companies in Gibraltar, putting an end to a long-running row between London and Brussels. The Commission had last month declared the tax breaks to be illegal state aid and gave Britain four weeks to accept an end to what is known as the exempt company scheme. It allowed companies to avoid paying corporate tax in return for an annual fee. This regime will be phased out by 2010. The number of companies that can profit from the scheme will be capped at the 2003 level. Neelie Kroes, European Union competition commissioner, said the abolition of the scheme was "a further important step towards eliminating harmful tax practices that violate state aid rules". Tobias Buck