Feeds

Revenue weighs up Arctic Systems appeal

Taxing issue

Providing a secure and efficient Helpdesk

HM Revenue & Customs (HMRC) is expected to announce this week whether it will appeal a court ruling which stopped the government from restricting the way in which married couples running their own business file their taxes.

It is believed that HMRC will release guidance indicating if it will appeal to the House of Lords following last month's landmark ruling by the Court of Appeal in favour of Arctic Systems, an IT firm owned by husband and wife Geoff and Diana Jones.

HMRC objected to tax arrangements the couple used in running their business.

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

Through a clause in the tax code, the couple shared the remaining amount 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.

The ruling could affect some tens of thousands of small, family businesses should the House of Lords reject the Court of Appeal's decision to allow their existing practice.

Equally, if the HMRC opts to go along with the Court of Appeal's decision, many firms could be entitled to tax refunds.

HMRC's forthcoming tax guidance is expected to clarify the way in which married couples running small businesses should file their taxes under Section 660A of the tax code, according to the Professional Contractors Group (PCG).

The PCG, which supported the couple's case, has issued advice for family business owners who must complete their self-assessment tax returns by the end of this month.

"If your circumstances are very similar to those outlined in Geoff Jones' case, then you should complete your return on the basis that you are not caught by S660A," said Dave Smith, the PCG's legal team member at Accountax Consulting.

"But a note should be made on the white space stating you are relying on your circumstances being substantially similar to the Jones v Garnett case and that reliance is being placed on the Court of Appeal ruling."

Jones also urged business owners to avoid formal arrangements and contracts of employment, make no pre-arranged policy on salary levels or dividends, make both spouses directors, maximise and document the efforts of the non fee-earning spouse and consider an outright gift of shares to the non fee-earning spouse before the business becomes profitable.

Copyright © 2006, Startups.co.uk

Secure remote control for conventional and virtual desktops

More from The Register

next story
Doctor Who's Flatline: Cool monsters, yes, but utterly limp subplots
We know what the Doctor does, stop going on about it already
Facebook, Apple: LADIES! Why not FREEZE your EGGS? It's on the company!
No biological clockwatching when you work in Silicon Valley
'Cowardly, venomous trolls' threatened with TWO-YEAR sentences for menacing posts
UK government: 'Taking a stand against a baying cyber-mob'
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Ex-US Navy fighter pilot MIT prof: Drones beat humans - I should know
'Missy' Cummings on UAVs, smartcars and dying from boredom
Sysadmin with EBOLA? Gartner's issued advice to debug your biz
Start hoarding cleaning supplies, analyst firm says, and assume your team will scatter
Zippy one-liners, broken promises: Doctor Who on the Orient Express
Series finally hits stride, but Clara's U-turn is baffling
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.