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The Professional Contractors Group (PCG) has announced that the case is scheduled to be heard by the House of Lords on June 5-7 2007 inclusive.
This is much later than had originally been hoped and means that the uncertainty will remain for small businesses for at least another seven months - way past next January's tax filing date.
Background
Arctic Systems, a small IT consultancy owned by Geoff and Diana Jones, has been the centre of attention in the small business world for several years. The Revenue chose to challenge them with a Section 660 case, the so-called married couple's business tax. The Revenue argued that this meant that dividends paid to Diana Jones should, for tax purposes, be attributed to Mr Jones, the primary fee-earner - and higher rate tax payer. Originally they faced a tax bill of over £40,000 and a victory for the Revenue in this case could open the floodgates for challenges for possibly hundreds of thousands of similar businesses.
This division of shares between husband and wife is common in many small companies. In fact, at the time, the Government's Business Links website advised that 'if desired, family-members' remuneration can be topped up by other means - through regular share dividends, for example.
The Arctic Systems case, supported by several small business organisation, has already been on the legal roller-coaster ride for years. Originally, the Revenue won in a 'split-decision' by the Special Commissioners in June 2004. The Revenue's victory was reinforced by the High Court in March 2005, before that decision was overturned by the Court of Appeal in December 2005.
Next year's House of Lords case will be the final stage in this lengthy legal journey, not only for Geoff and Diana Jones, but for many husband and wife businesses.
Further information
Shout99 has a free Section660 news resource with indepth analysis of all stages of the Arctic case and continuing news on all Section660 matters: See Section660 news centre.
Freelancers Outside IR35 (FO35) includes protection for Section660 investigations as well as IR35. For more information or to order online (£104.50), see Freelancers Outside IR35.
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Susie Hughes © Shout99 2006
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