Chancellor Alistair Darling could change the way husbandand- wife firms deal with their tax arrangements in his his first Pre- Budget Report today.

The Inland Revenue was left reeling in July this year when it lost a long-running legal wrangle with West Sussex-based IT company Arctic Systems.

The taxman was concerned that owner Geoff Jones had deliberately paid himself a low salary to pass a larger share of company profits to his secretary wife.

But the Court of Appeal ruled that owner Mr Jones's decision to pay dividends to his wife Diana was perfectly legal and did not amount to tax avoidance.

The Joneses, of Broomershill Lane, Pulborough, saved on their tax bills by drawing a large part of their income in share dividends, which are taxed less than salaries. The Government continues to believe it is losing a substantial amount - about £1 billion a year - from other family firms structuring their finances in this way.

At the time a Treasury spokesman said income-splitting "undermined the principle of independent taxation that each person should be taxed on their own income".

"Not to act would lead to the unfair situation in which some businesses are able to pay less tax than others simply because of personal situations,"

the spokesman said.

Accountancy firm Grant Thornton, which has an office in Dyke Road, Brighton, said Mr Darling was likely to signal a change in the law in his speech to Parliament today.

Mike Warburton, senior tax partner, predicted Mr Darling would announce the abolition of the law that permits the tax exemption of "gifts"

between spouses.

He said: "The reality for the average family business is that everyone gets involved by picking up the phone or discussing strategy over the kitchen table, which makes it difficult for the revenue to assess these businesses with the basic rules as they are.

"Labour is likely to make life even harder for businesses set up this way."

Mr Darling is also expected to admit the economy will grow next year by less than forecast. The 2.5 per cent to three per cent growth range pencilled in by former Chancellor Gordon Brown could be trimmed to two per cent to 2.5 per cent. This will give the Chancellor little scope for giveaways.

However, there has been speculation that he may announce changes to inheritance tax and stamp duty, after Conservative proposals in these areas proved popular with the electorate.

There is also speculation he will announce measures to close the tax loopholes for private equity funds and reform capital gains tax.

Meanwhile, the British Chambers of Commerce has called for transport to be placed at the heart of government policy. It claimed that Britain's competitiveness was being damaged by its crumbling, underfunded network, with the country spending half the amount spent on transport by France and the US.

The group said despite road users paying £45 billion to the Treasury every year, only £7 billion was reinvested in the road network, while investment in the railways has not kept up with increases in passenger numbers.