A parting shot for 2007 from Mr Darling....? Nope..

Christmas Parties

So the silly season is upon us again and clients are busy checking their staff parties don't exceed the tax free limits - £150 per head - and that they are "annual and open to everybody".  It's a generous limit but it's surprising how often the Revenue try to tax people on it - particularly where you have different parties for, say, different groups - not everybody wants everybody at the same bash.  If you're worried about this, give Brian La Piazza in the office here a call for a chat at your convenience.

An end to sharing with your spouse

Since my last blog, we've had a colourful and interesting new consultation paper on "income splitting".  Before you all think I'm being extra dull for Christmas, this one is worth a read if you run your own business and have other family involved even as shareholders. 

Historically, we've been very careful to ensure that a family business looking to take dividends, or in partnership, would spread the payments to keep everybody paying as little 40% tax as possible.  Needless to say, those dour Jocks in Downing Street don't like this - they want the "right" or "fair" amount of tax (maximum then!).

The HMRC lost a landmark tax case (Arctic Systems/Jones) recently. 

They tried to argue that giving shares in a business and loads of dividends to a spouse to save tax was contrary to some old anti-avoidance rules.  They lost hard at the Lords - but this was not really a win for the taxpayer as we now have the announced new draft legislation to plug the gap (to give HMRC what they want!). 

If this draft legislation is implemented next Spring, as planned, it will mean that you cannot divert profits of a partnership or dividends from a company to any other taxpayer to save tax - so the days of husband and wife tax planning may be about to become much harder.  I've got some ideas how we can get around these rules, but I'm not saying what they are yet!....one to watch and a nasty change in sentiment - husbands and wives really are to be taxed at the highest rate possible!

A Capital Idea Darling - take 10% and make it 18%

Of course, the main chat in tax circles has been about Alistair Darling's, apparently rather silly, idea to abolish business assets taper relief for capital gains in order to give private equity firms a kick in the teeth for being greedy.  In reality this is simply the Government realising that a 10% rate they created for entreprenuers has been too generous and that if they leave it in place people will organise their affairs to make capital gains rather than to create income. 

There's been an unprecedented backlash from all kinds of people on his announcement in November and we were supposed to get some further details before Christmas - I guess he wanted to stand up and say "there's my decision, and it's bad news" before running home to spend Christmas at no 11 and hoping it'll all be okay in January after all....  Still, 2 weeks is a long time in politics.  After all, 2 weeks ago we were talking about corrupt party funding and that is almost forgotten now as the latest headlines hit the papers.  However, there was news just as I was writing this that he's put his final decision into January.

It's fair to say his announcement has been tempered since with promises to "listen" and to re-introduce retirement relief in some cases (a small sum) - my money is on there being no major climbdown here (despite George Osborne's expectations there will be)- after all it would be an enormous slice of humble pie to eat to back down on an announcement already made - so fingers crossed for some proper transitional relief.  The changes, if implemented, will have fundamental effects on tax charges for clients- mostly for the worse.  In particular, people who hold assets from prior to 6th April 1998 will lose their locked in indexation - and that is a really nasty little bit of petty theft - hopefully he'll decide to back down on that at least.  In any case, if he does save his announcement to "the House" for January it leaves "not much time" until 5th April for planning - maybe that's why he's holding off - to prevent people making arrangements to bring forward capital gains... it could be a big hangover for taxpayers hoping to sell their business assets in 2008....

Time for Charity

Some of you know that I have agreed to help the dinner committe for the Epilepsy Scotland's superb "Wags Dinner" and this year's is on 3rd April 2008.  I've put a couple of links here-  it's a great night and, at the very least, you should have a look at the promotional video with Chick Young.  To top it off, they're offering tables with a discount until 11th January!

http://www.epilepsyscotland.org.uk/wags_dinner_glasgow.htm

And the booking form -

http://www.milnecraig.co.uk/view_documents.asp?fld_document_section_ID=4

Finally, a Merry Christmas to you all. 

2007 wasn't a bad year for tax practitioners - but it was a bad one for most of our clients who are involved in their own business in some way - 2007 will be looked at as the year the Government turned its back on the ideas Gordon Brown had in 1998 to give tax breaks to entreprenuers and family businesses that take risks to create wealth in the economy. 

I had one friend suggest the only way to fix our tax system is to break the union with England - to create a "mini-Monaco" tax haven using revenue from oil, financial services and whisky to get us started!.....

......- if Monaco is a "sunny place for shady people", could Glasgow be a "shady place for sunny people"? - it certainly seems like it in Glasgow during December when the drinks are flowing fast.

Merry Christmas and have a good New Year !

Donald

**As usual -the views above are those of the tax partner, Donald Parbrook, and are not a statement of firm policy.  Readers should not place reliance upon website articles and blogs of this type and should consult their accountants, lawyers and tax advisers etc. before planning.**