The initial reaction from the tax sector to the Chancellor's decision to postpone new rules on income shifting has been one of optimism.
Alistair Darling's debut Budget today included a deferment of the plan until Finance Bill 2009 to allow more time for consultation.
The CIOT's vice president, Andrew Hubbard, said his organisation welcomed 'the Government's decision not to go ahead with its proposed income shifting legislation'.
He added: '[Our] view has always been that the… rules were a sticking plaster solution, which did not address the real structural problems inherent in the ways that small businesses are currently taxed.
'The [CIOT] welcomes the Government's commitment to a wider consultation over the way in which small businesses are taxed and looks forward to taking part in the consultation.'
Kevin Nicholson, UK head of entrepreneurs and private companies at PwC was equally jubilant.
He said: 'As they stand, the income shifting proposals fail the certainty and practicality criteria that are necessary for a workable tax system.
'If the legislation is to work, it must take into account the type of small businesses that it is targeted at.
'Legislation must be simple and easy to comply with if it is to work effectively.
'For small companies to succeed and grow in the UK, they need to remain focused on developing the commercial needs of their business as opposed to managing the business according to increasing regulatory requirements.'
The reaction by Tenon's national head of Tax, Andrew Jupp, included a note of caution.
He remarked: 'The good news is that legislation will now not come into effect until the Finance Bill 2009.
'The bad news is that small businesses face continued uncertainty for another year.'
PKF expressed disappointment that the Chancellor's speech 'failed to mention the biggest move in his Budget for small businesses, choosing instead to bury the announcement in the paperwork issued to tax advisers'.
Lisa Macpherson, the company's national director of tax, said she was 'astounded' by this decision.
'It's incredible that he didn't mention it,' she remarked. 'This move, which we have been calling for since the impending legislation was first announced, is very important for the personal tax position of many small business owners and gives them time to put their tax affairs in order'.
However, Ms Macpherson seemed content that income shifiting laws had been postponed.
'Had the draft legislation come into force next month as planned, many family businesses would have had to keep considerably more detailed records to prove that they were not shifting business income between family members to save tax,' she said.
'It had all the makings of a red-tape nightmare for SMEs as well as costing them more tax. Presumably the Chancellor has sought to save face by not including it in his speech.
'If the legislation is to be introduced in a year, HMRC must set out hard and fast guidelines on exactly what records are needed to establish the market rate of return for each person involved in the business.
'In addition, the Government needs to consider carefully the policy issues involved - they need to clarify when the 'income shifting' rules will be applied.'
