Business Management zone

Ministers renew attack on income shifting

According to web service ContractorCalculator, chancellor Alistair Darling and his team are "actively considering" a new version of the attack on the so-called family business tax.

Proposals to outlaw what ministers believes is an abuse of the dividend process by small businesses owners and their partners and spouses were first introduced in last autumn's pre-budget report. Following outrage from lobbyists, Darling announced in his March budget that the plan would be deferred for a year.

But ContractorCalculator claims that the proposals are currently being shaped in a way that will more effectively target contractors and the smallest businesses.

While full details of the revision have not been released, tax consultant Simon Sweetman told the website: "The plan is to target contractors who, the Treasury believes, are using income shifting as a tax dodge whilst excluding other small businesses where it is used fairly, or so the Treasury believes."

Dave Chaplin, chief executive of ContractorCalculator added: "We had all hoped this proposal would disappear but now it's back, and small business should once again begin to lobby against this deliberate attack.

"The government claims to support a flexible economy and contractors are the basis of that kind of economy. Yet not only does the government do nothing to support contractors, and there is not a single programme in place at the BERR for our industry, but rather it finds continual reasons to burden our industry with excessive regulation."

According to Chaplin's website, a contractor and their spouse or partner earning £6,000 each with pre-tax profits of £75,000 would see their tax liability increase by 42% and their income rise by 9.6% under the income shifting proposals.

Number of comments: 2

Mark Lee, 02 May 2008 @ 15:07 PM

"In his first budget Alistair Darling announced that the government will not be enacting its proposed legislation to combat what it terms as "income shifting". Instead, new measures will be postponed until 2009, pending further consultation to ensure that any legislation will provide "clarity and certainty" for businesses and their advisors."

Mark Lee
Tax Advice Network

Mark Lee

Mike Whittaker, 30 April 2008 @ 14:09 PM