NEW TAX RULES WILL “STIFLE ENTERPRENEURIALISM IN WALES”

A leading tax advisor is warning that Government plans to clamp down on small firms owners in Wales who “shift” income onto their spouse or partner will “stifle the already weakened breath of entrepreneurialism” in the country.

Leighton Reed, tax director at professional advisors Broomfield & Alexander, will tell a seminar in Cardiff next week that new legislation due to be introduced from 6 April this year will also be a minefield of confusion and complexity.

Mr Reed will tell family owned businesses, small businesses and partnerships that when people set up their own businesses, they should ideally be entitled to share the reward in any way that they wish.

The new regulations are aimed at stopping the practice of “income shifting”, whereby a man or woman running a small business and paying tax at 40%, pays half the earnings of the business to their spouse in order to reduce their own tax liability. But traditionally the spouse does not play any real part in the running of the business, and the Government has now ruled that this tax advantage is unacceptable.

“The thrust of the proposals are that families should record and quantify the labour and capital that each person has introduced into the business,” he said. “This is going to be very difficult to measure and quantify and keep records of. For example, if a wife has stayed at home as a way of supporting her husband so that he can maximise profit, then how do we quantify this?

“Small family businesses are the lifeblood of the Welsh economy, but once again, married couples and family-run businesses going to bear the brunt of further Government legislation which will only serve to stifle the already weakened breath of entrepreneurialism in Wales.

“There are still strategies that can be used to help couples and family-run businesses find themselves in this position, but it’s important that they take professional advice as soon as possible.”

Places at the seminar, which takes place on 18 March 2008, can be reserved by contacting marketing@broomfield.co.uk. Information is also available at http://www.broomfield.co.uk/NE_forthcoming_events.htm