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The CIOT said it had long been of the view that fundamental reform to the structure of small business taxation was necessary if small businesses are to be able to plan their tax affairs with any degree of certainty. 

The Institute added that it accepted that what it prefers to regard as “income sharing” within members of the family unit is an issue which would need to be considered as part of that reform.

It said, however, that it regarded it as “completely wrong” for the Government to deal with this one issue in isolation and from the narrow and exclusive viewpoint of anti-avoidance. 

Andrew Hubbard, CIOT vice-president, said that the fact that the EDM had cross-party support reflected the growing concern about the issue.

“While we are now at a late stage in the process, the CIOT still urges that there be a re-think on the issue,” according to Hubbard.

The Early Day Motion expresses concern over the proposals for a new tax on income shifting in view of the disquiet expressed at the proposals by small businesses, the self-employed, freelancers, accountants and other affected parties.

MPs are concerned that the new tax will make it impossible for jointly-owned businesses to self-assess their tax liability with any certainty.

“Ever since the introduction of the independent taxation of spouses, it has been standard practice for married couples to own businesses jointly. This was recommended by the Government for many years and people who followed this advice now face being penalised,” they say in the motion.

They believe that the proposals are in direct conflict with the Government's stated aim of encouraging enterprise and small businesses.

The motion argues that the new proposals will also be inconsistent with divorce law and capital gains tax. Spouses will be entitled to an equal share of the value of a business when they divorce, or of the proceeds from it when sold, but not of the profits while it is operational.

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Related links

• CIOT
• Early Day motion – Income Shifting