Feeds

Arctic Systems tax ruling is victory for family businesses

Keeping up with the Joneses

Build a business case: developing custom apps

A husband and wife have won a landmark victory against the taxman, as appellate judges have thrown out the government’s attempt to force small, family-run firms to pay thousands more in tax.

Geoff and Diana Jones of West Sussex convinced the Court of Appeal to overturn previous rulings against them.

HM Revenue and Customs (HMRC), which took issue with tax arrangements they used in running their IT company Arctic Systems, has pursued the couple since 2001.

Despite a turnover of nearly £100,000, Mr. Jones paid himself a salary of £7,000 for running the business, while his wife drew just £4,000 for administrative work.

The couple then shared the remaining amount, less tax and expenses, in dividends, which allowed them to pay less tax and national insurance.

Mrs. Jones received more in dividends to take advantage of her lower tax rates.

Judges in the Court of Appeal ruled that Mrs. Jones’ dividends did not constitute tax avoidance because they were dependent on the company’s performance.

Accountants warned the Joneses and other firms with similar arrangements in 2001 that Inland Revenue was not happy with their tax situation and would begin to crackdown.

The Joneses brought their case to an HMRC tribunal last year and lost and had their appeal to the High Court also rejected in April of this year. Both ruled that income from a non- or low-earning spouse who co-owns a business should be taxed at the same rate as the main earner.

The case has created headlines for the potential impact either ruling would have on thousands of small firms across the country.

Small, family firms could have faced tax bills of up to £9,000 each under the HMRC campaign. But now they appear to have been given a reprieve after appellate judges warned HMRC it was going too far.

“This is the best Christmas present for the UK’s small family businesses,” said Simon Juden, chairman of the Professional Contractors Group (PCG).

“It means proper recognition for the hundreds of thousands of people who choose to run their own businesses, share the burdens and the hard work with their partners, and rightly expect to share the profits of their efforts.”

The case was originally scheduled for January but was brought forward so as to give guidance to taxpayers before the 31 January deadline.

Copyright © 2005, Startups.co.uk

Build a business case: developing custom apps

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Banking apps: Handy, can grab all your money... and RIDDLED with coding flaws
Yep, that one place you'd hoped you wouldn't find 'em
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
Ex-IBM CEO John Akers dies at 79
An era disrupted by the advent of the PC
prev story

Whitepapers

Gartner critical capabilities for enterprise endpoint backup
Learn why inSync received the highest overall rating from Druva and is the top choice for the mobile workforce.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.