Cookies are small text files that are stored on your computer when you visit a website. They are mainly used as a way of improving the website functionalities or to provide more advanced statistical data.
Income Shifting is Coming Soon!
Newsletter issue - January 08.
From 6 April 2008 it will be far more difficult to reduce your tax bill by paying dividends or profit shares to less active shareholders in your company or members of your partnership. This is because of a new law on income shifting that will affect nearly every partnership and jointly owned company in the UK. It doesn't matter whether those co-owners (partners or shareholders) are married, other relatives or simply friends.
If you make a bigger contribution to the business than your co-owners, but receive a similar share of the profits, the Taxman could argue that you have shifted income away from yourself, so it falls into the hands of those co-owners who play a less active role in the business. You will have to pay tax on the amount of shifted income, and the less active co-owner(s) will be treated as having never received that shifted income.
Although the new income shifting law will only affect dividends or profits shares paid out from 6 April 2008, those profits may have been earned by the business many years earlier. If you are planning to pay a dividend on 6 April 2008, to place that income in the 2008/09 tax year, you may want to bring the payment forward to avoid the new income shifting rules. However, you should be careful of pushing your total income for 2007/08 into the higher tax bracket.
If you want to continue to pay profit shares or dividends to less active co-owners of your business from 6 April 2008, you will need to justify the amount paid according to the recipient's contribution to the business. This contribution could be measured by:
- the amount and type of work done
- the individual's responsibility for making key decisions for the business
- the capital contributed to the business
- the business risk taken on, such as a personal guarantee of a business loan
You may need to adjust the agreed profit sharing ratio of your partnership, or the number of shares each individual holds in your company, to reflect the actual input of each individual. We can help advise you on the best action to take and what to do in order to reduce the risk of being attacked for income shifting.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
Please complete our form
to request a callback
Competitive fixed quotes
for agreed services
Increase your profit and
reduce tax liabilities
Expert advice for your
business size
