CIOT Warns UK Government On Post-Arctic Systems Tax Plans

by Amanda Banks, Tax-News.com, London

16 January 2008

The Chartered Institution of Taxation (CIOT) has warned the government this week that going ahead with business tax plans developed in the wake of the Arctic Systems case will counteract the work done so far to cut red tape.

Rob Ellerby, President of the CIOT, sent a letter earlier in the week to the Financial Secretary to the Treasury, Jane Kennedy, stating that:

"The Chancellor has set out his vision of simplifying the tax system, but these proposals fly in the face of that vision. The Administrative Burdens Advisory Board has the task of reducing admin burdens of business, but these proposals are, if enforced, likely to wipe out any gains made by that body."

The government is currently working to implement proposals which would see prevent businesses run by a husband and wife team from 'income shifting'.

It has been argued that couples who conduct a business in this way gain more tax benefits and contribute far less to national insurance.

However, Mr. Ellerby is arguing that if the government proceeds with its intervention into the taxation of this type of business structure, then it will contradict the Chancellor's announcement last year that he wishes to simplify the tax system for businesses in the UK.

Mr. Ellerby's letter went on to say that should the government proceed, they will simply "unleash enormous administrative burdens for thousands of family businesses."

It continued:

"The proposals seem to us to fail the tests of workability, practicality and certainty. They display little understanding of the businesses that Government seeks to tax."

"We trust that you will be open to a proper discussion with representative bodies on these proposals, which in their current form are simply not “fit for purpose"," it concluded, according to an Accountancy Age report.

In response to the letter, a spokesperson for the Treasury told the Telegraph that the government was simply intending to use the consultation currently taking place on this matter to refine the implementation of principles already outlined by the government.

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