Inland Revenue Guide Fails To Clarify Section 660 Ambiguities
by Robert Lee, Tax-News.com, London
22 November 2004

The UK tax authority's attempt to clarify the rules for small businesses concerning the Section 660 Settlements legislation has been condemned by the Professional Contractors Group, which believes new guidelines will not help firms decide whether they are affected by a recent court ruling.

The guide, published by the Revenue last week, has been issued in response to the landmark decision by the Special Commissioners of Income Tax in the recent Arctic Systems case, and stipulates that husband and wife-run firms cannot share dividend income in order to reduce tax.

However, according to the PCG, which has supported the owners of Arctic Systems in their legal battle with the Revenue, the guide “fails to address key elements of the vagueness surrounding this measure and does little to mitigate the uncertainty for small family business owners, who will no doubt be surprised to hear that they are not classified as ‘ordinary businesses’”.

“We stand by our belief that where families share risk, they should also be able to share reward, as advocated on the Government’s Business Link website,” PCG chairman, Simon Juden added.

Meanwhile, Anne Redston, tax partner at accounting firm Ernst & Young was also critical of the new guide, noting that it contained “nothing new.”

“I am extremely disappointed that the Revenue have not used this opportunity to clarify their guidance. The fragments of new information it does contain only serve to emphasise the difficulties faced by small businesses who want to find out whether or not the Revenue considers that the legislation applies to them,” she observed.

The PGC is now seeking donations to help fund an appeal in the Arctic case.

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