|
A panel of Law Lords this week ruled in favour of a small family business in a long-running tax dispute.
Geoff and Diana Jones run the small IT consultancy firm, Arctic Systems Ltd.
They had been involved in a battle, lasting several years, against a £42,000 tax bill imposed on them by what was then the Inland Revenue.
Tax inspectors had questioned the way in which the couple had renumerated themselves through their firm as a form of tax mitigation.
The couple used dividends from the business to pay themselves, the shareholders.
HMRC argued that Mr Jones had transferred some of his income to Mrs Jones so he could benefit from her lower tax status - and argued that the dividends should be taxed as part of his income.
However, the Lords ruled that the couple do not have to pay the back-dated taxes, because the case fell within the exemption from the relevant company legislation provided for an outright gift between spouses.
The case has huge implications for thousands of family businesses structured in a similar way to Arctic Systems.
David Kilshaw, head of private client advisory at KPMG, said: "The spectre of horrendous tax bills has disappeared.
"Thousands of businesses have literally been saved from bankruptcy by the House of Lords."
Bill Knox, taxation chairman at the Federation of Small Business, welcomed the ruling and said: "Hounding hardworking small business owners sullies the good name of HMRC and will not instil confidence in the UK small business community as a whole, which rightly expects to be treated proportionately and fairly by the tax authorities."
See copyright notice
| Other
Top Business News Stories |
|
Business
News 
