In his Budget on March 12th 2008, the Chancellor of the Exchequer announced that his proposed Family Business Tax on "income shifting" will be postponed by a year to allow for further consultation: it is still his intention to introduce it in the Budget in 2009, to be effective from April 6th that year.

This follows extensive lobbying by PCG, including:

• a formal response to the consultation document
• an accompanying commentary on the consultation
• a formal complaint regarding the conduct of the consultation
• a House of Commons Early Day Motion, signed by 178 MPs
• an e-petition on the 10 Downing Street Website, which got into the top 20 most-signed petitions on the site
  
• a press briefing in the House of Commons with Opposition spokesmen and the Chartered Institute of Taxation.
  

PCG remains dedicated to fighting this unfair and unworkable proposal, and will be contributing fully to the new round of consultation. Recent developments include:

• a new Early Day Motion has been tabled; PCG has secured an amended version
• initial debates on the Finance Bill have taken place; PCG has compiled the relevant highlights
• the Chancellor of the Exchequer was grilled on the subject by the Treasury Select Committee.
  

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 be unworable: it 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.
• The proposals have been drawn up without any evidential basis, and a policy decision taken without proper impact assessment procedures being followed.
• The policy intent behind the legislation is grossly inconsistent with other areas of law, such as the treatment of rental income or the division of assets in a divorce.
  

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 full consultation paper from December 2007, including the draft legislation, can be read on the Treasury website.

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.