Income-shifting legislation deferred again

The Chancellor has recognised the difficulty of introducing measures to combat 'income shifting' – a practice that HMRC has always considered abusive and perhaps even more so in the current economic climate. Some may take a more cynical view and conclude that HMRC has recognised the difficulty of producing targeted legislation.

Baker Tilly analysis

As expected the Chancellor has deferred the introduction of measures to combat 'income shifting', a process by which an individual moves part of their tax liability to another person with a lower rate of tax (most often seen in the context of married couples through the use of share ownership and company structures).

Despite HMRC's much publicised disaffection with its defeat in the high profile tax case of Arctic Systems, following which it promised the introduction of measures to combat what HMRC considered an abusive practice there are still no firm proposals for dealing with this issue. Having deferred the introduction of measures in this area once already the Chancellor has a declared that "given the current economic challenges", the legislation will be deferred again, to a date as yet unspecified.

The original proposals on income shifting are generally considered to have been abandoned after the expression of considerable dissatisfaction, which many considered were unworkable. It is anticipated that there will now be further consultation and that HMRC will use the further deferral period to reach some degree of consensus on how this should be achieved.