News

The Chancellor's Pre-Budget report has dealt a hammer blow for family-owned firms, including optical practices, after he announced that there will be a ban on so called 'income-shifting arrangements'.

In his statement to the House of Commons on Tuesday, Alistair Darling said the ban would raise around £485m in revenue by 2011.

This move will allow HM Revenue & Customs to clamp down on married couples who set up their practices around one spouse's work. This measure also overturns a House of Lords decision on the landmark Arctic Systems case in July.

The Chancellor said the 'draft' legislation would be announced shortly but is likely to come into force in 2008-2009 allowing tax officials to require businesses to ensure that shareholders and partners are receiving a share of the profits that are line with their contribution to the business.

Other proposals announced by the Chancellor included the abolition of the so-called taper relief on capital gains tax of 10 per cent and instead he introduced a new 18 per cent tax rate to be applicable across the board.

Commenting on the implication of this proposal, Marc Bennett of AEL Partners, which specialises in offering tax advice to opticians, said: 'Opticians who have been planning to sell their practices in the foreseeable future may well decide to bring forward the sale to before April 2008. This will enable them to still be taxed at the existing tax rate of 10 per cent on the sale of a business owned for more than two years.

'Any practice sales made after April 2008 will face the new standard CGT rate of 18 per cent, so practice owners are effectively looking at an 80 per cent increase in their tax bill. As an example, the sale of a practice worth £300,000 would net the owner an extra £24,000 in tax savings if it was sold before April 2008.'

Providing exclusive eye care news, information and educational needs every week, including a FREE CET programme. Subscribe to Optician Print Edition.