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BUSINESS MATTERS
contention. The view of bodies such as the been that they have regularly taken cases similar against small businesses (who are fundamentally
Chartered Institute of Taxation (CIOT) has all to Arctic Systems and settled with taxpayers – on their own and usually end up paying various
along been that there were three broad issues though many advisers were unaware of this being other taxes such as VAT and business rates).
with the HMRC stance: the case. Those taxpayers may well be due a
The future
Technical – that as what was involved was an repayment, depending on their circumstances and
ordinary share, conferring a right to vote, anyone in that situation should undoubtedly be Any euphoria for taxpayers and their advisers
participate in the distribution of assets etc., then talking to their tax adviser. was short lived. The government has already
it could not be just a right to income announced it will change the law to reverse the
Practical – if what they expected was the right This doesn’t signal a free-for-all in tax planning. effect of the House of Lords’ decision. That is not
amount of income to be paid to the Mr Jones of There was a case a few years ago where an entirely unexpected but the immediacy of
this world, how could one accurately assess that? established, profitable company, owned and run by announcement is disappointing; any changes need
Retrospection – this case seemed to represent a two men, arranged to give their respective wives a careful consultation. Changes need to have regard
change of stance from the taxman, challenging an block of preference shares. Those shares didn’t to those principles set out earlier – including the
arrangement that had been used for many years. carry votes or any other rights other than a right freedom of married couples to arrange things tax
Although at times HMRC justified their argument to the preference dividend. It was held that that efficiently. Would there, for instance, suddenly
by saying that the settlements rules had been arrangement was a settlement and it was simply become a block on transferring assets tax-free to
around since 1936, this was rather specious in of a right to income – so the preference dividends help plan for capital gains tax or inheritance tax?
that they didn’t become relevant to couples until fell to be taxed on the husbands. That case wasn’t Or might we see national insurance imposed on
the 1990s and separate taxation of husband and overturned in any way by Arctic Systems. dividends?
wife!
What next?
But this new case does reiterate that couples Those would be major changes that would have
can make use of what the tax system allows to wide ramifications. It’s not clear when changes will
HMRC have said they will accept the decision minimise their tax bills. That is as it should be: be made from – probably next April.
and issue new guidance. There have been a whilst people faced with PAYE operating on their
number of statements and notes from HMRC and salaries may feel that there is an unfair advantage In the meantime, Mr and Mrs Jones will
professional bodies alike in terms of how to here, the fact is that the tax system operates hopefully be able to recover their costs, tear up
handle the issue. There may be couples who are differently between employees (who have lots of their tax bill and get back to their real job of
due a repayment. One of HMRC’s contentions has support and rights from their employers) as running an IT consultancy.
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www.mayerhousebusinessmedia.co.uk AUGUST 2007 P R I N T W E A R T O D A Y 35
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