| The introduction of the
proposed legislation on ‘income shifting’
has been delayed until April 2009.
You may well remember that HMRC
proposed to legislate following their
defeat in the Arctic Systems case. This
involved a husband and wife who owned a
company 50/50 and, broadly, took the
profits out by way of dividends, again
50/50. HMRC attempted to tax the dividends
solely on the husband, as he was
performing most of the work which
generated the profits of the company.
Following HMRC’s defeat in this case,
the government published draft legislation
to prevent a tax advantage being gained
through ‘income shifting’. This
legislation was expected to apply from 6
April 2008 to:
- company distributions, usually
dividends; and
- profits from a partnership.
The proposed rules have been very
widely drafted and would, in their current
form, catch many owner-managed businesses
involving husbands, wives and other family
members, as well as businesses run by
non-family members, leaving many with a
substantially higher tax bill.
The government has reconsidered its
position following a period of
consultation and now believes that a
further period of consultation will ensure
that legislation in this area provides
clarity and certainty for businesses and
their advisers.
The government now intends to introduce
legislation through Finance Bill 2009 and
will not enact legislation effective from
6 April 2008.
We will, of course, keep you informed
of developments. However, if you have any
questions or concerns in the meantime,
please do not hesitate to contact us.
Internet link:
Press notice |
