Call to axe income shifting plans

News Article - 11 April 2008
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The Federation of Small Businesses (FSB) has stated that it does not believe that there is a need to redefine the status of SMEs, but has called on the government to scrap new legislation against income shifting.

According to the organisation, an early day motion in the House of Commons proposes both redefining the legal status of small businesses and dropping new legislation against income shifting.

Simon Briault of the FSB explained: "This is a tool by which the changes to income splitting can be opposed, or the situation can be resolved."

He added that the FSB would support any move that "is to the benefit of small businesses", including redefining the legal status of limited liability companies.

The term income shifting refers to a situation in which couples who jointly own a firm split the dividends between them in order to minimise tax liabilities.

An early day motion calls for the creation of a new legal entity to represent small businesses in the 21st century.

Smaller firms can use SME accounting software to meet regulatory requirements and keep track of income shifting.

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