Section 660 - Arctic Systems Win Appeal

Geoff Jones of Arctic Systems has won his landmark Section 660 appeal. The case, supported by the Professional Contractors Group (PCG), was heard in late November this year.

Welcoming the judgment, PCG chairman Simon Juden, said, "This is the best Christmas present for the UK’s small family businesses. 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."

Jones, who was at the Royal Courts of Justice with his wife Diana, said, "This is the end of three years of uncertainty for us – at one point we thought we’d lose our home. It’s been extremely stressful and we’ve been made to feel like criminals, just for running our own business. What’s more, by organising our affairs in this way, we were simply following government advice and that of our accountants."

The Section 660 rule, has been UK legislation since the 1990's. Its primary aim was to prevent people passing across assets and income to family members in an effort to reduce their tax liabilities, whilst intending to reclaim those assets at a later date. However, this rule was not, until recently, applied to company dividend payments.

In the Arctic Systems case, the tax authorities objected to the manner in which the couple involved renumerated themselves with a mixture of salaries and dividends, which had the effect of reducing their joint tax liability.

The appeal is very good news for "husband and wife" businesses - we will report further developments on Bytestart over the next few weeks.

For full details of the ruling, and analysis, try these links:

Accountax full analysis of the ruling (PDF)

Ross Martin Tax Consultancy analysis of the ruling