Press Room
Grant Thornton calls for certainty for taxpayers after
Chancellor outlines more consultation in Pre-Budget
Report
Tuesday 9 October 2007
Despite a ruling by the House of Lords in July which concluded that
the legislation allows couples to undertake the practice of passing
income between each other to save tax, in today's pre-budget report
the Chancellor has announced that he will now undertake
consultation with businesses 'shortly' to counter the practice of
'income shifting'.
Income shifting involves individuals investing in companies or
partnerships to arrange their affairs to gain tax advantages by
passing part of their income via dividends or partnership profits,
to another person who is subject to a lower rate of tax.
While welcoming the fact that the Chancellor will consult with
businesses, Grant Thornton has called for greater certainty for
businesses to ensure that they know where they stand.
Francesca Lagerberg, head of Grant Thornton's National Tax Office,
says: "The Government is going to consult with businesses, on the
operation of the measure, but it is not interested in debating the
principle. What businesses need now is 100% certainty
as to what the future holds and clear guidance."
The press notices issued by the Treasury states that the factors
that they will consider includes the work done by the individuals
in the business, the investments made and the risks to which they
are subject through the business. Whilst this will ensure
some white lines, these factors may prove difficult to measure in
practice.
"The biggest hurdle will be measuring the time spent working on the
business, as the reality of the situation is that it is difficult
to define the tax parameters in family business situations - for
example if a conversation takes place around the breakfast table is
it defined as time spent working on the business or not?" she
concludes.