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Tax simplification would do away with the need for IR35, MSC's and Income Shifting

Published on Jul 21, 2008 |

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The Chartered Institute of Taxation has called for small business tax reforms in its 2009 Budget representations - including the need for a well thought out response to the income shifting legislation issue.

Although the CIOT welcomed the deferral of the original income shifting proposals in Budget 2008, it says that any further attempt to legislate for income shifting should be "limited to a simple set of rules which could deal with whatever the precise mischief is that concerns the Government, without creating additional burdens".

The CIOT has called for a review of the entire small business tax system, with a level playing field irrespective of the company structure chosen to run a business.

As there are still tax advantages to setting up a business via a limited company, the tax body suggests integrating the national insurance (NIC) and income tax systems.

The CIOT suggests that if this issue were resolved, there would no longer be a need for IR35 and Managed Service Company legislation - there would also be no need to legislate for some income shifting.

You can read the text of the CIOT's representation in full here (PDF)