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Income Shifting - Government plans to revive proposals
Posted Apr 28, 2008
According to a contractor news site, The Treasury is working to revive its proposals on income shifting, which would limit the ability for small businesses to share dividend income with spouses or partners.
ContractorCalculator says that the proposal is being shaped in a way that will more effectively target contractors and the smallest businesses. Both of these, the Treasury believes, abuse the dividend process to reduce their tax bills unfairly.
It remains to be seen how the proposal can be shaped so that it will be effective at all. The last proposal, which was based on a market valuation of the services provided all shareholders in small companies, was found by all tax experts consulted to be entirely unworkable.
"Not only is the proposal difficult to frame, but the theory itself is flawed: there is no reason why certain small businesses should be treated differently from others with regard to tax. Moreover, contractor companies often share the work between partners: just because one partner earns more than another does not mean that one contributes nothing to the company. The idea is discriminatory, and a deliberate attack on contractors." says Dave Chaplin from ContractorCalculator.
"We had all hoped this proposal would disappear," Chaplin says, "but now it's back, and small business should once again begin to lobby against this deliberate attack. The Government claims to support a flexible economy and contractors are the basis of that kind of economy. Yet not only does the Government do nothing to support contractors-- and there is not a single programme in place at the BERR for our industry - but rather it finds continual reasons to burden our industry with excessive regulation."
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