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Mobilisation

Late yesterday, a written Ministerial statement was issued by the Exchequer Secretary to the Treasury, Angela Eagle, announcing the intention to legislate. "Small businesses and settlements legislation" The Government acknowledges the judgement given by the House of Lords in the Jones v Garnett (Arctic Systems) case.

The Government is committed to maintaining fairness in the tax system. The case has brought to light the need for the Government to ensure that there is greater clarity in the law regarding its position on the tax treatment of 'income splitting'.

Some individuals use non commercial arrangements (arrangements that they would not reasonably enter into with an arms-length third party) to divert income (which would, in the absence of those arrangements have flowed to them) to others. That minimises their tax liability, and results in an unfair outcome, increasing the tax burden on other tax payers and putting businesses that compete with these individuals at a competitive disadvantage.

It is the Government's view that individuals involved in these arrangements should pay tax on what is, in substance, their own income and that the legislation should clearly provide for this. The Government will therefore bring forward proposals for changes to legislation to ensure this is the case. In the meantime, HMRC will apply the law as elucidated by the House of Lords and will be providing guidance in due course.
The Government would not want commercial arrangements to be caught by any change to legislation. Consultation should help to ensure this.

(It would be churlish, small-minded and unworthy to observe that before becoming an MP, the Exchequer Secretary to the Treasury's experience of work appears to have comprised - as is typical of so many members of the present administration - employment as successively a union researcher, Press Officer, Parliamentary Liaison Officer and Constituency Party Secretary, which some might see as a poor grounding for an understanding of small businesses: so we won't make that observation.)

We believe that it is important for all advisers to small businesses to take whatever steps are possible, including lobbying decision makers, to resist the introduction of ill-thought out unfair and unworkable legislation. We would be delighted to email out to any interested reader the text of a letter that we have ourselves sent.