Government proposals on how to tackle income shifting will be "the absolutely crucial decision" for the majority of SMEs in the forthcoming budget, it has been claimed.
Income shifting - which SME owners can use to reduce their tax bill - may face a clampdown with the prime minister suggesting that the law surrounding it needs to be changed to ensure fairness.
Andrew Hubbard, vice-president of the Chartered Institute of Taxation, said: "What we're looking for is whether in the budget [the chancellor] says he's going to go ahead with the income shifting proposals, postpone them or modify them."
However, Mr Hubbard also believes that a fundamental reform of tax for SMEs is needed, dubbing the current situation a "sticking plaster arrangement".
In July 2007, the House of Lords ruled in favour a husband and wife run company who had been accused of unlawfully avoiding a tax bill of £50,000 through income shifting.
