Small family-owned businesses to be penalised this April

The Government is planning to launch a new Family Business Tax in this year’s Budget, which it claims is intended to tackle “income shifting”.

Please take a few moments to tell them why they should reconsider their plans, and forward this blog post to anyone you think might also be concerned at the new tax rules.

Remember – if you own a business jointly with a family member or anyone else, this will affect you: don’t miss your opportunity to do something about it.

The new laws, due to come into force from April 6th 2008, will:

• mean a significant tax rise for jointly-owned businesses where profits are distributed equally between a husband and wife (or other family members / civil partners) and the recipients make differing contributions to the business – in some cases, even business owners who are not related to each other will be hit

• deny married couples who are equally exposed to the risks of running a business the right to an equal share in the rewards if the business is successful

• penalise people who followed the Government’s long-standing advice to set up businesses jointly

• make it impossible for businesses to self-assess their tax bills, and leave them perpetually looking over their shoulder in fear of an aggressive investigation by HMRC, in which they will have to prove that they have done nothing wrong

• be totally inconsistent with divorce law, as couples will be entitled to equal shares in the value of the business in a divorce, but not to equal shares in the profits while they are married

• be totally inconsistent with capital gains tax rules, as couples will be entitled to equal shares in the proceeds from business when it is sold, but not to equal shares in the profits when they own it

• reverse the independent taxation of spouses in respect of couples who own businesses, even though the Treasury’s consultation paper does not explain what has changed that would justify this reversal

• impose crushing burdens on small businesses who will have to record every contribution made to the business, simply to defend themselves against an attack from the Revenue – that time could be better used generating wealth for the economy

• fail to recognise that dividends or other profit distributions are a reward for taking risk and are not simply income comparable to a salary.

Take Action

Please sign the petition on the 10 Downing street website:
http://petitions.pm.gov.uk/IncomeShifting1

The petition asks the Prime Minister to abandon the current plans to introduce a new “income shifting” tax on family businesses.

Please also consider writing to your MP on the subject and asking them to support Early Day Motion 714 against the proposals. Advice on how best to go about it is available from the PCG here:
http://www.pcg.org.uk/cms/index.php?option=com_docman&task=doc_download&gid=367

There is further information about the “income shifting” Family Business Tax at www.familybusinesstax.co.uk.

The above information is taken from the Professional Contractors Group (PCG) membership mailing, and is reproduced with permission.

Related posts:

1. Income Shifting: My Letter to Gerald Howarth, MP for Aldershot
2. HMRC impose tough new practices on businesses
3. Income Shifting, Shifted.
4. HMRC online filing availability notice for April 2009
5. Taxman clueless over Arctic Systems costs

Tagged as: family, HMRC, Income Shifting, Small Business, Tax