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Geoff and Diana Jones, who own Arctic Systems, became reluctant celebrities in the small business world when the Revenue challenged their business under the Section 660 legislation. Geoff and Diana, with support of interested groups and individual donations, became the test case for tens of thousands of small businesses.
After early defeats in the Special Commissioners and High Court, the scales of justice tipped in favour of Arctic Systems with a recent victory in the Court of Appeal.
The ball is now in the Revenue's court to decide if they will appeal the case to the House of Lords or not. In the meantime, married couples running their businesses are faced with filling in their tax returns by the end of January.
It is expected that some form of guidance will be released by the Revenue to assist with this process in the near future, possibly early this week, when a decision is known of the case will be appealed.
As you were
According to the Daily Telegraph, HM Revenue and Customs (HMRC) has accepted that tens of thousands of small business owners affected by last month's Arctic Systems case can calculate their personal tax bills using existing planning practice.
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"If we are not going to appeal, the status quo becomes the norm. But if we are going to appeal, it would be prudent to set some money aside. The guidance will be out next week."
Guidance
Geoff and Diana Jones with PCG's Simon Juden (centre) |
The Professional Contractors Group (PCG) who supported the case has already issued advice for family business owners wondering how to complete their tax returns in light of the Arctic Systems judgment.
PCG's legal team member Dave Smith of Accountax said: “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 Section 660A, 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.”
PCG’s advice is that family businesses in a similar situation to that of the Joneses should:
avoid formal arrangements and contracts of employment
have no pre-arranged policy on salary levels or dividends
make both spouses directors
maximise and document the efforts of the non fee-earning spouse
consider an outright gift of shares to the non fee-earning spouse before the business becomes profitable.
The PCG caution that freelance contractors will want to take expert advice in the context of their individual circumstances and this advice is provided for general guidance only.
Section 660 information
For further information about Section 660 and the Arctic case, see Shout99's free news and information resource.
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Susie Hughes © Shout99.com 2006
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