Freelancers' relief over Family Business Tax reprieve

Family businesses have been given a temporary reprieve from the chancellor's planned Family Business Tax ("income shifting"), which he announced in the Budget will be delayed until 2009. The Professional Contractors Group (PCG), which represents the UK's freelancers, is pleased that Mr Darling has listened to the extensive and detailed response to the proposals submitted by the PCG.

PCG's managing director John Brazier said: "We are glad that Mr Darling has taken notice of not just the experts but the thousands of people who signed the petition on the 10 Downing Street website, the MPs who signed the Early Day Motion against the proposals and others. There has been a clear consensus that the FBT proposals would not have worked. We hope the next phase of consultation will result in a sensible outcome."

PCG has pledged to provide full input into the next phase of consultation, saying "We will hold the Chancellor to what he promised today: a 'stable business tax regime that is responsive to business needs'," concluded Mr Brazier. "We are glad that there is now an opportunity to persuade the Government to reconsider fully."

PCG would like to thank everyone who has responded to this campaign by contacting their MPs and signing the e-petition, it is good to know that the hard work from everyone involved has paid off. We look forward to further sensible thinking and simplification of the tax burden on both business and individuals.

CLICK HERE TO JOIN THE PCG NOW AND HELP DEFEND THE FREELANCE COMMUNITY  FROM THIS AND ANY FUTURE ATTACKS

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Budget Update:

• Corporation tax will fall from 30% to 28% by April this year
• Mr Darling said there will be simpler taxes for small companies
• Funds available through the small firms loans guarantee will increase by 60% in the next year
• There will be a capital fund of £12.5m to encourage more women entrepreneurs.
• INCOME SHIFTING DELAYED UNTIL 2009:

The Government firmly believes it is unfair that some individuals can arrange their affairs to gain a tax advantage by shifting part of their income to another person who is subject to a lower rate of tax.

The Government has considered the responses received to the recent consultation and believes that a further period of consultation will ensure that legislation in this area provides clarity and certainty for businesses and their advisers.

The Government now intends to introduce legislation through Finance Bill 2009 and will not enact legislation effective from 6 April 2008.

PCG congratulates Mr Darling on seeing sense over this ill thought-out proposal

Campaign Adverts:

Look out for a national advertising campaign by the PCG on the Family Business Tax. This takes the form of an open letter to Alistair Darling and will be appearing in most national newspapers starting on the 9th March. You can see the first advert on PCG's website by clicking here

Latest: 

The Early Day Motion now has a very healthy 172 signatures from all parties, and the e-Petition now has 7,238 signatures, putting it in the top 25 petitions. Only a few hundred more would put us in the top 20. If you haven't already signed...

We ask you to sign the petition urgently

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In 2007 the Chancellor of the Exchequer announced his intention to prevent "income shifting": this, he claimed, is the practice of splitting income between two people, often spouses or civil partners, in order to make use of the tax allowance of the lower-earning partner.

The full proposal has now been published: click here to view it on the Treasury website. PCG members can currently give their opinions in the PCG Policy Forum, to feed into PCG's formal response.

All freelancers and small business owners are urged to:

• write to their MPs, asking them to oppose the measure and to sign the Early Day Motion asking the Government to reconsider its position (PCG has published advice on how best to go about this);
• add their name to PCG's e-petition against the proposals on the 10 Downing Street website.

PCG opposes this proposal.

• We believe that when two people are exposed to the risk of running a business, they should be entitled to share the reward.
• We also believe that this measure will require all affected businesses to keep a record of every single contribution, of whatever kind, made to a business: this will result in a crippling level of red tape.
• Inevitably, the rules will be complex: self-assessing a tax liability with any certainty will be impossible, and this will reduce incentives for taxpayers to make efforts to comply with their obligations, as they will be bound to fail - the only question will be whether or not HMRC picks them for investigation.
• It will mark a sharp divergence between tax law and divorce law: while a spouse might be entitled to over half the value of a business in a divorce, while in marriage they may not be entitled to share any of the profits.
  

The Story so Far

 An Early Day Motion has been laid in the House of Commons expressing alarm at the proposals.

PCG Policy Briefing on "Income Shifting" (October 2007)
A summary of the problems with the new proposals.

PCG Policy Briefing on "Income Shifting" (January 2008)
A political briefing on key arguments against the new legislation.

PCG Notes on "Income Shifting"
A more extensive consideration of the difficulties with any possible approach to restricting "income shifting"; written before the Government's full proposals were published.

Anne Redston article on "Income Shifting" (January 2008)
Originally published in Taxation magazine, reproduced with permission.

The proposals regarding "income shifting" arose from the Government's historic defeat in the Arctic Systems case; for details, please see PCG's page on S660A and the Arctic Systems case.

PCG has issued its formal response to the proposals, and also a commentary on the consultation document. In addition, PCG is complaining to the Better Regulation Executive about the conduct of the consultation. 

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