What does the S660 case loss mean to contractors?
Well, first of all could it apply to you? The easiest way to determine this is to ask two simple questions.
1. Does your spouse own any shares in your Company? If no, then S660 does not apply. If yes, then go to question 2.
2. Does your spouse perform any significant work for the Company. For example, do they bring any significant income into the Company? If yes, then relax, S660 does not apply. If no, then you could be caught by S660.
How much could it cost me?
Difficult one to answer without looking at individual circumstances, but if you were caught, and if the Revenue decided to investigate you, and if you lost, you could be looking at the following:
1. Calculate how much you have paid by way of dividend to your spouse over the past 6 years;
2. If you were a higher rate tax payer for each of those years (very roughly if you earned over £30,000 pa), multiply this figure by 25%
3. Add to this figure around 6% per year for interest. This will give you a very worse case scenario of the possible cost.
That's the worst news. A nugget of good news is that to date the Revenue have only brought around 100 of these cases in the past 10 years, so your chances of investigation are actually very low. Also, in the case that was lost (the Arctic Systems case as it is known), the Revenue only actually went back for 1 year, rather than the 6 that they are statutorily allowed.
It may well be that following the result the Revenue will up these kinds of investigations, however, with around 500,000 Companies possibly affected it is impossible that they could investigate any but a tiny percentage of these.
Our advice would be to sit tight, transfer any shares that you have given your wife back to you, and vote for anyone but Labour in the next election!
Article kindly supplied by SJD Accountancy