ATT: Relief cap will distort business decisions

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The government’s proposed cap on income tax relief should be scrapped because it would “distort” decisions on how businesses are structured, the Association of Taxation Technicians has told HMRC.

The warning was in response to draft Finance Bill provisions for capping tax relief at £50,000 or 25% of income, whichever is greater. The change is due to take effect on or after 6 April.

The AAT said it was pleased that some business situations had been excluded from the cap on tax relief in the draft legislation, but added the draft legislation was “still flawed and risks damaging businesses as well as impacting unfairly on individuals.”

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