Arctic Systems advances into November
A landmark ruling covering S660A that has implications for thousands of husband and wife companies will be heard before the 2004/2005 deadline for self-assessment.
Much to the relief of small businesses and their advisors, the tax case between Geoff Jones of Arctic Systems and HM Revenue and Customs has been brought forward from mid-January 2006.
The Court of Appeal will now hear the appeal case of the Sussex-based IT consultancy in London on November 29 and 30, 2005.
The Professional Contractors Group (PCG) has welcomed the earlier judgment on behalf of Geoff and Diana Jones, and the thousands of other small family-run businesses trading in fear of the 1930's legislation.
"We sincerely hope that this means the chance of a judgment in time to bring certainty for taxpayers before the 31 January Income Tax Self-Assessment deadline," said Simon Juden, PCG chairman.
Although the initial hearing, scheduled for January 17 and 18, fell before the self- assessment income tax deadline, it is understood the verdict would not have been disclosed until after January 31.
Geoff Jones of Arctic Systems said he hoped an earlier conclusion to the S660 dispute would help other small traders.
"My wife, Diana, and I are relieved that the hearing has been brought forward, and we hope that the case will be settled fairly and quickly," he said.
"Not just for our sake but also for the thousands of other family businesses affected by the uncertainty."
Advice for those entrepreneurs who will file their returns before the Court of Appeal's forthcoming verdict, comes in three courses.
According to the PCG, a taxpayer whose business is structured as to give a non-fee earning shareholder dividends should:
* Note on the return that they are caught under the current interpretation of S660A and pay the tax accordingly, only later to claim it back in the event of a defeat for HMRC in court.
* Note that they are caught under HMRC's current interpretation of S660A but also that they disagree with this and believe that the Court of Appeal will rule against this interpretation, adding
that should HMRC's view be upheld in court they will of course revisit the issue.
*Keep quiet, mention nothing on the return and hope for the best. PCG strongly advises not to follow this option.
The Group's experts advise that the second option should not be deemed negligent and therefore cannot attract penalties.
Should Arctic lose their appeal, taxpayers who have followed the final option, contrary to recommendations, should immediately alert HMRC to their mistake in order to stand any chance of avoiding penalties.
Professional advice should be taken before acting on any of the above, as PCG cautions the recommendations, which it says are endorsed by the UK's six main tax bodies, are intended as general guidelines only.