| You may well remember
that the Arctic Systems case 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 has published draft
legislation to prevent a tax advantage
being gained through what has become known
as ‘income shifting’. This legislation
will apply from 6 April 2008 to:
- company distributions, usually
dividends; and
- profits from a partnership.
The proposed rules are very widely
drafted and will 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.
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:
Income shifting consultation |
