Distributing your profits

Temporary reprieve from controversial new tax rules

Business groups have welcomed the decision to give hundreds of thousands of family businesses a temporary reprieve from the controversial new tax rules governing the way that they distribute their profits.

The planned clampdown on husband-and-wife companies that split the income generated from their businesses in order to reduce their joint tax bills by using their personal allowances will now not take effect until at least 2010.

The Treasury said in a statement: “The government firmly believes it is unfair to allow a minority of individuals to benefit financially from shifting part of their income to someone else who is subject to a lower rate of tax, known as income shifting. The government has consulted on this issue but, given the current economic challenges, the government is deferring action and will not bring forward legislation at Finance Bill 2009.”

Instead the government said it would keep the policy “under review.”