OTS to address income splitting

THE THORNY issue of family businesses splitting their income to avoid paying tax has raised its head again, after the Office of Tax Simplification (OTS) said it was looking to resolve the matter.

Speaking to the Telegraph, OTS tax director John Whiting said that income splitting was one of the issues it was looking into, alongside National Insurance Contributions and IR35.

“I hope we can come up with some quick tweaks that can make a difference, but I am no under illusions that some of the things we could come up with will require some serious study,” said Whiting.

HMRC has been battling through the courts in order to prevent income splitting, most notably involving the Arctic Systems case, where the House of Lords found in favour of the family-run business.

While legislation has been mooted, no laws have yet been passed that fully prevent income splitting.

“I don’t think we were ever confident that income splitting was in that ‘never to come out again’ box,” said Whiting. “It is in the Dracula category. I don’t think anyone ever put the stake through its heart.”


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