The Government is currently consulting on draft legislation to prevent a tax advantage being gained through income shifting. The consultation period will close on 28 February 2008.
The consultation document Income shifting: a consultation on draft legislation" sets out the Government's view that income shifting, through which one individual can shift their income to another in order to gain a tax advantage, leads to unfair outcomes. It asks whether the draft legislation, which applies only where a tax advantage is gained through non-commercial arrangements and where the shifted income is in the form of a company distribution or share of partnership profits, meets the Government's aims. It also seeks comments on the draft guidance published alongside the legislation, to ensure that the legislation is clear to businesses and their advisers, and that administrative burdens are minimised.
However, the Federation of Small Businesses says that proposed changes could end up impacting on divorce cases when both partners worked in the same business.
More information, including the consultation, can be found on the HM Treasury website: