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The Chartered Institute of Taxation (CIOT) has welcomed an Early Day Motion (EDM) on income shifting that has been tabled in the House of Commons.

The text of the EDM reads as follows:

“That this House notes with concern the proposals for a new tax on income shifting; is aware of the disquiet expressed at the proposals by small businesses, the self-employed, freelancers, accountants and other affected parties; is concerned that the new tax will make it impossible for jointly-owned businesses to self-assess their tax liability with any certainty; observes that ever since the introduction of the independent taxation of spouses, it has been standard practice for married couples to own businesses jointly, that this was recommended by the Government for many years and that people who followed this advice now face being penalised; is concerned that the proposals are in direct conflict with the Government's stated aim of encouraging enterprise and small businesses; observes that the new proposals will be inconsistent with divorce law and capital gains tax, so that spouses will be entitled to an equal share of the value of a business when they divorce, or of the proceeds from it when sold, but not of the profits while it is operational; and urges the Government to reconsider its proposals ahead of the Budget.”

The CIOT has long been of the view that fundamental reform to the structure of small business taxation is necessary if small businesses are to be able to plan their tax affairs with any degree of certainty. 

The Institute accepts that what it prefers to regard as “income sharing” within members of the family unit is an issue which would need to be considered as part of that reform, but regards it as completely wrong for the Government to deal with this one issue in isolation and from the narrow and exclusive viewpoint of anti-avoidance. 

Andrew Hubbard, CIOT Vice-President, says: “The fact that the EDM has cross-party support reflects the growing concern about the issue.  While we are now at a late stage in the process, the CIOT still urges that there be a re-think on the issue.“

Link

Income Shifting Early Day Motion

Chartered Institute of Taxation