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Arctic Systems Win At Court Of Appeal

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Mods: Off topic I know, but likely to be of interest to at least some members.

The long running tax case concerning the operation of section 660(A) ICTA1988 has been decided at the court of appeal in the taxpayers favour.

This ruling reverses an earlier high court ruling in HMRC's favour.

For those not familiar, HMRC have been trying to asses dividends paid from the jointly owned business to the wife of Mr Jones on Mr Jones himself, with the aim of significantly increasing the couples tax bill.

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Guest magnoliawalls

Mods: Off topic I know, but likely to be of interest to at least some members.

The long running tax case concerning the operation of section 660(A) ICTA1988 has been decided at the court of appeal in the taxpayers favour.

This ruling reverses an earlier high court ruling in HMRC's favour.

For those not familiar, HMRC have been trying to asses dividends paid from the jointly owned business to the wife of Mr Jones on Mr Jones himself, with the aim of significantly increasing the couples tax bill.

Great news :)

Have you any links that explain this in more detail?

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There is a bit on http://www.accountingweb.co.uk, but i think you may have to register:-

"The Court of Appeal found in favour of Geoff and Diana Jones of Arctic

Systems in their appeal against the High Court's ruling in favour of HM

Revenue & Customs' interpretation of the s660a settlements legislation.

Accouncing its decision on Thursday morning, the court ruled that the

dividends paid to Mrs Jones did not arise under the settlements rules, as

HMRC had claimed.

The Joneses were swamped by reporters after the landmark decision, which

throws the current HMRC policy out of the window.

Nicola Ross Martin, reporting from the court, will provide an analysis of

the judgment and a guide for taxpayers completing their 2004/05 tax returns

on Friday morning."

AccountingWEB 15-Dec-2005

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Mods: Off topic I know, but likely to be of interest to at least some members.

The long running tax case concerning the operation of section 660(A) ICTA1988 has been decided at the court of appeal in the taxpayers favour.

This ruling reverses an earlier high court ruling in HMRC's favour.

For those not familiar, HMRC have been trying to asses dividends paid from the jointly owned business to the wife of Mr Jones on Mr Jones himself, with the aim of significantly increasing the couples tax bill.

This is good to hear but it is I fear a Pyrric victory. The Arctic Systems tax claim was so outrageous (they demanded £40K out of the blue) that many small companies simply closed down. The tax system has become so arbitary and vindictive that businesses can no longer plan for the future. The IR35 fiasco introduced by Gordon Brown had a success rate of less than 1%. It did however drive a large number of engineers and scientists abroad.

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Only turning up in my school uniform with my satchel at the tax office made them go easy on me. Even then I was given a stern lecture about keeping full written accounts for my (nonexistent) work in future.

Please sir, can you charge me tax for work I didn't do...

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Can't really give any links as I only have the accountingweb newswire that has already been posted however here are my general thoughts.

Although initially some thought that s660(A) could be applied to all owner managed businesses, it has been accepted for some time that it can only apply to "personal service companies"; where there is one fee earner taking a below market salary and a second non-working spouse.

S660(A) (and the separate IR35) does not apply to the majority of companies.

It will be interesting to see if HMRC decide to appeal to the House of Lords, if not then we can be fairly sure that legislation will be introduced to extend s660 to cover this sort of situation from April 2006 onwards.

Assuming that this is not overturned on appeal, the main effect will be to stop a retrospective tax charge on the (at least) several hundred personal service companies who do fall within the rules but have (prior to the Arctic Systems case) thought they were outside them.

Briefly, the major area of concern has been that HMRC would seek to apply this power to the six previous tax years open to them. Whilst legislation will inevitably be introduced to prevent taxpayers taking advantage of this in the future, the threat of a demand for tens of thousands of pounds in back duties and interest has understandably worried those affected.

Whether HMRC decide to appeal will no doubt depend upon the reasoning of the court so uncertainty is going to remain for some time yet.

As a final point, such uncertainty really can not be good for business generally and the case highlights the absurd complexity that now charcterises UK tax law.

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  • 302 Brexit, House prices and Summer 2020

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      • down 5% +
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      • Even
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      • up 5%



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