Budget special: Chancellor tightens law on family firm incomes

Practitioners should act now to ensure they are prepared for controversial tax rules which aim to clamp down on husband-and-wife firms that split income to reduce tax bills.

A delay in the introduction of the 'income shifting' regulations for family business employees was announced by Alistair Darling in his Budget statement last Wednesday.

The crackdown followed a court battle between HMRC and Geoff and Diana Jones, owners of Arctic Systems, after tax officials alleged that Mr Jones moved income from the business to Mrs Jones in order to use her basic income tax rate.

The Chancellor confirmed last week that legislation to close this loophole will come in force in the next 12 months and is expected to apply from the tax year 2009/2010.