Income Shifting Consultation Document

**malvolio** · 6 December 2007, 15:58

Originally posted by Lewis View Post

http://www.hm-treasury.gov.uk/media/...e_shifting.pdf

This is very intresting, in that it manages to redefine "Income", "Shifting" and "Consultation" while simultaneously using the Arctic judgement as justification for changing the law so that Artic, if tried again, would lose . It also fails to understand the economic and social reality of the thing they are attacking in all their blind, unthinking, commercially unaware ignorance of the subject. And since when did words like "might" have a place in a legal definition?

If it wasn't so dangerous, it would be hilarious. Read it and weep at the ineptness of our current Government

**Lewis** · 6 December 2007, 16:21

It says

Within the legislation there are several conditions, all of which must be met for the legislation to apply. In summary:
• Condition A – individual 1 is party to, or has power over the relevant arrangements;
• Condition B – individual 1 forgoes income and the forgone income is individual 2’s for the relevant tax year;
• Condition C – individual 1 has the power to control the amount that is shifted; and
• Condition D – the shifted income consists of distributions of a company or profits of a partnership.

I love the "detail" around Condition C, which reads:

The term “power to control or influence” is not defined and is intended to be interpreted in its widest sense.

Recipe for disaster if you ask me ... no definitions and wording that is deliberately open to "interpretation" ... arg! What is wrong with clear black and white definitions?!

**Bright Spark** · 6 December 2007, 16:57

so what is the best strategy, is it to declare and pay dividends before
5th April 2008, and continue operating as normal until a test case
further clarifies this, or is it better to start a new company from 6th April 2008
as a sole shareholder?

What would be the penalties apart from paying the extra tax from getting
caught?

**Lewis** · 6 December 2007, 17:07

Originally posted by Bright Spark View Post

so what is the best strategy, is it to declare and pay dividends before
5th April 2008, and continue operating as normal until a test case
further clarifies this, or is it better to start a new company from 6th April 2008
as a sole shareholder?

What would be the penalties apart from paying the extra tax from getting
caught?

I think it is fair to say you can declare dividends pre-April 08. Starting a new company is probably a bit more hassle than required. My guess is that you can just get the 'wife' to transfer shares back to you.

No idea about penalties.

It seems to me (and I have only skimmed this document and am no expert) that if the wife does some work (e.g. admin) and is paid a salary she may be able to get some albeit small dividend to reflect her involvement. So maybe share splits will move from 50:50 to 10:90 - just guessing here.

**Xenophon** · 6 December 2007, 17:09

Mal - can you help bring the full force of the PCG onto this? They are even using the word 'fair' again...

P.S. I am a member and have been for ages.

**BigTime** · 6 December 2007, 20:59

would forming separate companies work?
1 for contractor and 1 for admin.
admin co has an ir35 friendly contract to provide services to contractor ltd. lots of IT contractors get paid well for not alot so why can't an admin contractor.

**malvolio** · 7 December 2007, 07:08

Originally posted by Xenophon View Post

Mal - can you help bring the full force of the PCG onto this? They are even using the word 'fair' again...

P.S. I am a member and have been for ages.

There is a big debate dissecting it right now (go visit the Policy board on the PCG Fora). We have also written to the Chancellor and assorted other bigwigs expressing our intiial concerns and will be submitting a formal response in due course. This is a consultation document, not a final draft, but the intent is clear if not the language. If HMG tries to take this through unchanged there will be major resistance from many sides.

You might also visit the main PCG Website - for example, http://www.pcg.org.uk/cms/index.php?...=3275&Itemid=1

**Troll** · 7 December 2007, 07:43

Oh Dear ™

As this is a consultation document I expect we will have to wait to see the legislation before any real holes become apparent.

**malvolio** · 7 December 2007, 08:03

Originally posted by Troll View Post

Oh Dear ™

As this is a consultation document I expect we will have to wait to see the legislation before any real holes become apparent.

No, there is a set process by which they publish a raft and invite commetns, the comments are assessed and agreed, and are then incorporated into the final draft that will go to Parliament.

However, if you work through the timelines on this one, they have issued it at the last possible moment to meet the 90 day requirment for consultation, and have left effectively no time to discuss and effect any other ideas. Hence PCG and others are adamant that this should not form part of the April 2008 Finance Act since it is a blatant attempt to subvert the Arctic judgement to address an issue that doesn't actually exist (that it is 'unfair' that couples who own a business might jointly prosper from that business when non-couples may not) and that is is drafted in such a way that it cannot be applied, fairly administered or tried in a court of law.

That, incidentally, is a good example of why I push the PCG. Depsite some people's perceptions, it's nothing to do with market share in respect of insurances and IR35, it's all about having the power, authority and presence to represent individuals who would otherwise have no voice.

Income Shifting Consultation Document