http://www.ft.com/cms/s/d0c80422-3a9...0779fd2ac.html
Tens of thousands of “husband and wife” businesses face a rise in their tax bills, after the Treasury said it would block a widely-used form of tax planning following an expensive legal defeat in Britain’s top court.
Plans for legislation are being drawn up to meet the government’s commitment “to maintaining fairness in the tax system”, it said. The move followed a decision by the House of Lords in favour of Geoff and Diana Jones, co-owners of Arctic Systems, a small IT business.
The ruling has ramifications for many business couples because the corporate arrangements at the heart of the case are widely used. By drawing low salaries and splitting corporate income between spouses who fall in different tax brackets, business owners have saved hundreds of millions of pounds of tax.
The Treasury said: “This case has brought to light the need for the government to ensure that there is greater clarity in the law regarding the tax treatment of ‘income-splitting’ arrangements, which are used by some taxpayers to achieve an unfair advantage over others.
“The government will therefore bring forward proposals for changes to legislation to ensure that the principle of fairness is maintained. The government’s intention is that genuine and commercial business arrangements will not be affected by this legislation and we will consult to ensure this is the case.”
Tens of thousands of “husband and wife” businesses face a rise in their tax bills, after the Treasury said it would block a widely-used form of tax planning following an expensive legal defeat in Britain’s top court.
Plans for legislation are being drawn up to meet the government’s commitment “to maintaining fairness in the tax system”, it said. The move followed a decision by the House of Lords in favour of Geoff and Diana Jones, co-owners of Arctic Systems, a small IT business.
The ruling has ramifications for many business couples because the corporate arrangements at the heart of the case are widely used. By drawing low salaries and splitting corporate income between spouses who fall in different tax brackets, business owners have saved hundreds of millions of pounds of tax.
The Treasury said: “This case has brought to light the need for the government to ensure that there is greater clarity in the law regarding the tax treatment of ‘income-splitting’ arrangements, which are used by some taxpayers to achieve an unfair advantage over others.
“The government will therefore bring forward proposals for changes to legislation to ensure that the principle of fairness is maintained. The government’s intention is that genuine and commercial business arrangements will not be affected by this legislation and we will consult to ensure this is the case.”
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