Arctic Systems - Landmark Victory
Landmark ruling is a victory for Joneses
The long running case involving husband-and-wife business Arctic Systems has resulted in a landmark victory for Geoff and Diana Jones and is welcome news for many similar family businesses.
The House of Lords rejected HM Revenue & Customs appeal and thus brought to an end this long running case. No further appeals are possible under UK law. In the original case, HMRC had used Settlements legislation, which covers the transfer of income from one person to another, to question the couple´s use of salaries and dividend payments to reduce their tax bill.
In their judgement this morning, the lords ruled that:
The Joneses did in effect enter into a settlement when they subscribed for one share each upon setting up their company, Arctic Systems. However, the exemption for gifts between spouses also applied and dividends paid to Mrs Jones were therefore not in effect income arising under a settlement.
It is widely expected that HMRC will now review and substantially re-write its guidance on Settlements and outright gifts. It remains to be seen what long-term view the new Chancellor and indeed HMRC will adopt in regard to small companies and their dividend policyt.
The full judgement can be read at www.parliament.uk
End.
Enquiries:
Peter Goodman, Tax Partner
T: 020 7403 1877
Roger Willliams, Tax Partner
T: 01784 435 561
