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The Government is now considering the definition of 'owner-managed' companies as part of IR591. The hints emerged in an exchange in Parliament between Dawn Primarolo and Michael Jack MP. Following on from our exclusive articles here and here about the details and timescales of IR591, we are now getting details of exactly who may be targetted. It seems that "owner-managed Companies" will be the ones. Dawn Primarolo revealed last week that the definition of owner-managed companies is under consideration. In reply to Mr Jack who asked the Chancellor how many owner managed small incorporated businesses pay tax, Ms Primarolo replied: "There is currently no precise definition within current tax legislation of 'owner manager'. This issue is among those being considered by the Government in the context of its announcement in paragraph 5.91 of the 2003 Pre-Budget Report." Mr Jack also asked: "what studies he (the Chancellor) has undertaken to determine whether small incorporated businesses are paying the wrong amounts of tax on profits extracted from their companies; what proposals he has to ensure that small scale enterprises are fully aware of the tax distinctions between their being (a) incorporated and (b) unincorporated; if he will make a statement on his proposals to ensure that the right amount of tax is paid by owner managers of small incorporated businesses on the profits extracted from their companies; if he will define (a) profit extraction and (b) acceptable profit extraction for small incorporated businesses; if he will consult small owner managed incorporated businesses on his proposals to ensure that their tax contributions are correct in the light of the contents of paragraph 5.91 of Command Paper 6042; whether it is his Department's policy to encourage sole traders or partnerships to become small limited companies; whether his proposals in paragraph 5.91 of Command Paper 6042 will include measures to help small incorporated businesses to unincorporated; whether the right amount of tax referred to in paragraph 5.91 of Command Paper 6042 includes National Insurance." To which the jovial Ms Primarolo replied helpfully: "Paragraph 5.91 of the 2003 Pre-Budget Report (Command Paper 6042) announced that the Government would bring forward proposals, to ensure that the right amount of tax is paid by owner managers of small incorporated businesses on the profits received from their company, protecting the benefits of low tax rates for the majority of small businesses. "The appropriate details and definitions will be set out in the Budget Report." So, it seems then that owners of small businesses are going to have to pay more tax so that owners of small businesses continue to enjoy "low" tax rates. Now who could argue with logic like that? Jan 22, 2004 Email this article Printer friendly page Previous Page
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