Arctic Systems: Fears are 'greatly exaggerated'

The judge who handed victory to HM Revenue and Customs in the landmark section 660A appeal said he believed that fears surrounding the impact of the decision are "greatly exaggerated".

Geoff and Diana Jones lost their appeal, heard last month, when Justice Park decided that the settlements legislation applied to dividends received by Mrs Jones so that they were taxable as her husband's income.

The judge pointed out that if a husband-and-wife team set up a joint company and ran it

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Comments

If Justice Park thinks the fears are "greatly exaggerated"

JSJ54 | | Permalink

shouldn't we be questionning his judgement?

But low salary, high dividends has become standard practice

AnonymousUser | | Permalink

I don't take issue with the judgement. As humble practitioners we just work on under whatever rules are thrown at us.

However, it has been the norm to pay £4,500 salaries and take the rest as dividends since it was made de rigueur by tax lecturers about four or five years ago.

Add to this the pressure from clients following mailshots from prospecting accountants, and the lower tax bills paid by their peers, and we reluctantly followed this regimen.

It seemed too good to be true but paying full salaries with NI was clearly the route to a PI claim.

Like many accountants we have followed the herd but at least we did it with caveats to the clients that it might not last, and amendments could be backdated.

There are 300 accountants in my yellow pages. If they've each got 15 clients like this that's 4,500 in south-east London alone.

It's going to be a huge number.

So it's back to the 'I told you this might happen...' letters.

Market Value Remuneration

AnonymousUser | | Permalink

The problem I have with this ruling is who is going to decide what is a "commercial" level of remuneration, is it the Revenue or should it be the officers of the company, the directors? In this "nanny" state of ours, this govt will say the Revenue, what do other members think?

I can envisage no end of problems on this issue and am just awaiting the "flood" of enquiry letters.

One other thing not mentioned in this article are the other situations including partnerships and husband/wife companies where the level of financial risk is not at question.

Role of the PCG

davidcee | | Permalink

As a PCG member I am not convinced that this was the right course of action. The last time I looked - a few months ago now - the IR websote said that they had pursued aruond 200 cases under this legislation since 1993 and that there were about 50 investigations ongoing. In addition they said that they had no intention of significantly increadsing that number. Perhaps the PCG should have let sleeping dogs lie.

Surprise Surprise

AnonymousUser | | Permalink

Come on now did we really think that there would be any other decision?
"The true going rate for his work". Has the Judge the right to challenge what is paid in remuneration or dividend. Come to that has anyone other than the officers of the company the right to decide.Taking it a stage further can employees take employers to court if they don't think they are being paid the "RIGHT wage".
Presumably now any company (regardless of husband and wife teams) who doesn't pay the "RIGHT remuneration" will come under fire.
Basically the court has decided that GB can do what he likes in his quest to make us pay the most Tax.
Or am I "greatly exaggerating" the circumstances.
So what of the future for the one man band business????????
Doesn't GB realise if more tax is paid, services go up in price, then wages go up - what's that called, oh yes inflation, isn't that what GB is trying to keep as low as possible???????????????????