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Income Shifting Legislation - Special Reports


On 9th October 2007 the Chancellor announced in his Pre Budget Report that measures would be introduced for 2008-2009 to tackle tax avoidance by 'income shifting.'

These measures are in the wake of the loss of the Arctic Systems (known as 'Section 660a') case by HMRC early this year. The Revenue tried to attack the tax savings available by married couples who split shares in their company, and subsequent dividends - thus taking full advantage of the tax allowances of both partners.

This section explains the background to the proposals, and will provide updates and guidance going forward.

Avoiding or coping with the Legislation

Income shifting proposals: how contractors should cope
The Treasury wants to put an end to income shifting, but contractors who share dividends with their spouses may be able to take concrete action to help ease the pain.

Background - Arctic Systems

Contractors could pay 10% more in the treasury’s Arctic Systems attack
The latest Treasury attack on contractors comes in the wake of the Arctic Systems Case and attempts to increase our tax burden.

The house of lords has upheld the appeal by Arctic Systems
The House of Lords announced that the appeal by Arctic Systems has been upheld.

Contractors who work with spouses need to understand arctic systems
The Arctic Systems case, which the Revenue definitively lost on July 26, does have an effect on how contractors run their companies.

About the proposals

Pre budget report: contractors dividend income under threat
In the wake of the loss of the Arctic Systems case, the Government is planning to change the ways in which contractors share dividend income. The Pre Budget Report warns of a consultation.

Income shifting - guide for contractors
Explains the term ''income shifting'', where it comes from, and what it is.

Calculating the cost

Income Shifting Calculator
Calculates effect on net income if you can no longer split dividends. Enter gross profits and salaries.

Section 660 Calculator
Our original calculator based on the settlement legislation. Same calculation, but enter contract rate, hours, etc.

Latest news

Income shifting - guide for contractors

Explains the term ''income shifting'', where it comes from, and what it is.

Others | Thursday, 8 June 2017

Income shifting measures could be revived, says OTS Tax Director John Whiting

Measures to tackle income shifting – the ‘family business tax’ – are on the Office of Tax Simplification agenda reveals OTS Tax Director John Whiting.

Others | Tuesday, 21 December 2010

Income shifting attack on contracting sector unlikely under coalition

The coalition government is considering tax breaks for married couples, possibly signalling the end of the income shifting attack on contractors?

Others | Wednesday, 6 October 2010

Income shifting proposal revived by Treasury with contractors in mind

Proposals on income shifting would limit the ability for small businesses to share dividend income among spouses or partners.

Others | Monday, 27 October 2008

How Much Will Income Shifting Tax Cost You?

Contractors who share dividends will pay a significantly higher amount of tax under the new income shifting proposals.

Others | Monday, 27 October 2008

Contractors face 47% tax rise with new income shifting proposal

The tax bill for contractors could rise as much as 47% when the new income shifting proposals from the Treasury are passed into law.

Others | Monday, 27 October 2008