Income shifting

Produced by a Tolley Personal Tax expert
Personal Tax
Guidance

Income shifting

Produced by a Tolley Personal Tax expert
Personal Tax
Guidance
imgtext

This guidance note considers how the settlements legislation can apply to income shifting, particularly as regards a family company.

Overview of the settlement provisions

A popular tax planning approach is to transfer income-producing assets between spouses or civil partners. This may be done where one pays income tax at a lower marginal rate than the other, or to ensure that personal allowances are used in full. Such arrangements are also known as ‘income splitting’ or ‘income shifting’. They have long been the subject of HMRC scrutiny.

The scope for tax saving is potentially greater with the introduction of the additional tax rate from 6 April 2010.

Inter-spousal / civil partner tax planning is assisted by the fact that for capital gains tax purposes, the transfer of income-producing assets should be a no-gain no-loss transfer. See the Inter-spouse transfer guidance note.

One aspect which has come under the spotlight is that such transfers may constitute a settlement. The settlement rules, as discussed below, are complex but they can result in income being taxed on the donor despite the transfer

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
Powered by Tolley+
  • 04 Dec 2023 13:10

Popular Articles

Married couple’s allowance

Married couple’s allowanceThe married couple’s allowance (MCA) is only available if one of the two spouses or civil partners was born before 6 April 1935. This means that one member of the couple must be at least 89 years old on 5 April 2024 to qualify for an allowance in the 2023/24 tax year.There

14 Jul 2020 12:13 | Produced by Tolley Read more Read more

Gilts

Gilts‘Gilts’ are securities that are also known by a number of different names (eg gilt-edged securities, Government securities or treasury stock).The Government sells gilts to fund the deficit between public spending and tax receipts. Normally, the Government pays interest to the holder of the gilt

14 Jul 2020 11:48 | Produced by Tolley Read more Read more

Non-business expenses

Non-business expensesIntroductionIn order for an expense to be tax deductible it must be incurred because of an employee’s employment. Any non-business related expense is, therefore, not relievable except in some very particular circumstances.This guidance note deals with three separate issues. The

14 Jul 2020 12:16 | Produced by Tolley Read more Read more