Budget 2008 - Tax measures in the pipeline

The full rate of corporation tax for businesses will decrease to 28 but the small companies rate will increase to 21 and then 22 as of 1 April 2009. Purchases of intellectual property goodwill and other intangible assets will still qualify for a tax deduction equivalent to the amortisation or impairment loss charged to the profit and loss account; a flat rate of 4 may be elected alternatively.

In Budget 2007 Gordon Brown raised the tax rate on smaller companies but claimed he was compensating for that by raising capital allowances - allowing so he said for revenues to be recycled to "legitimate businesses investing for the future". Can we put our faith in the wisdom of the state to know what businesses are "legitimate" or not or indeed what "investing in the future" might actually mean

At the bottom of the corporate chain is the attack on husband and wife firms. After being defeated by the Law Lords in the Arctic Systems Ltd case - in an effort to tax dividends paid out to spouses as if they were income the government is now attempting to introduce a cumbersome set of rules to combat what it calls income shifting that will force couples to assess exactly what contribution each partner makes to the business. Anyone whose spouse answers the phone will have to come up with some way of proving their contribution or else face a higher tax bill.

The Governments approach is not conducive to effective sustainable transparent and robust policy formation according to the Association of Chartered Certified Accountants ACCA. ACCA is also worried about the implications for financial confidentially which is still an issue for some spouses who are not prepared to share their income details.

The Governments proposals will target all jointly-owned businesses and family businesses in particular if profits are not shared out in what the tax man sees as a "commercial" way there could be a heavy tax penalty to pay.

Chas Roy-Chowdhury head of taxation at ACCA says "We are concerned that proposals could bring about the effective end of independent taxation. Whether they want to or not spouses will need to discuss openly with one another what income and taxes each is attributed in order to ensure they are not caught by the legislation.

"The Government now seems to be proposing a much higher burden of proof and record keeping requirements for family businesses - this is an especial burden for small business. The net result would be that there would be very little additional exchequer gain from this measure yet it will create significant burdens on small businesses."