Budget Speculation

Small husband and wife companies are expected to be among the losers when Alistair Darling, the chancellor, delivers his first Pre-Budget Report on Tuesday 9th October, 2007.  Announced on Friday, the minister’s inaugural PBR speech will be the first opportunity the government has had since it vowed to legislate against their income-splitting arrangements.  Made by the Treasury, the pledge in July came just 24 hours after the House of Lords ruled that Arctic Systems, and thousands of other firms, were entitled to use the tax structure.

The UK’s top accountancy body says any proposals in the PBR to nullify what the government sees as an “unfair advantage” for husband and wife firms must be followed by consultation.   Chartered accountant PKF believes the current political climate might deter the government from any sweeping change to the taxation of husband and wife companies.  But, in a statement, the firm said this would only delay the inevitable.  “With political considerations to the fore, it is perhaps unlikely that any sweeping changes will be announced by the chancellor in the Pre-Budget Report – although a consultation paper cannot be ruled out.  “However, in the longer term, it is clear that the income tax and NIC benefits of operating a small business through a company will be eroded,” PKF said on Friday.

Elsewhere, Grant Thornton wants the tax system to be simplified, a call likely to be endorsed by business groups.  In fact, the ICAEW has called for the consultation to be “open and detailed” on any new measures following the exchequer secretary’s July statement on the Jones V Garnett decision.