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The family business under the cosh
Following the Arctic Systems case Jones v Garnett heard in the House of Lords this year the Treasury will be taking a close look at family owned businesses as it perceives it is losing a substantial amount of income tax from the way these arrangements are structured in non-commercial situations. There has already been a statement to this effect where the Government has said it wants to close down the ability to income split. The key issue is how the Chancellor will implement any change. The most likely change will be the abolition of ITTOIA 2005 section 626 which is the legislative exemption in the so-called settlements rules. Section 626 concerns the tax exemption of outright gifts between spouses which are not caught by the trust rules. HM Revenue & Customs perceives income splitting as tax avoidance but the average family business conducts its business around the clock whether the family members are picking up the phone or discussing business matters over the kitchen table. So while it is difficult for the Revenue to assess these operations with the basic rules as they are the burden of proof is likely to be shifted onto businesses. 05 October 2007 Moneyextra.com Moneyextra.com recommends you take independent financial advice before acting on any article 2009-02-17 00:00:00 © Moneyextra.com