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 |
