A freelance IT contractor has been subjected to a Section 660A investigation and won. Section 660 - the so-called business tax between married couples and partners - has been the subject of much controversy and uncertainty since the Revenue started clamping down on what it perceived to be a 'loophole'.
This case concerns a small family company, with an annual turnover of a little over £100,000, run by a husband and wife who are the only shareholders. The investigation began in September 2003, with an enquiry into the wife's personal Tax Return. The Revenue's questions originally concerned remuneration, then quickly turned to investment income. The company's accountant suspected that a Section 660A investigation was afoot, and he advised the Company Director to consider dissolving his company and forming a new company with a different share structure. This was a signal for the director to contact Qdos to claim on his tax investigation insurance policy.
The case was allocated to Keith Preece, one of Qdos' Senior Tax Consultants who wrote to the Revenue, providing the information that the Revenue had requested, concerning the wife's shareholdings and remuneration, and giving the Revenue a comprehensive account of the wife's involvement in the business.
Two months elapsed and having sent a reminder back came a letter: the case had been submitted to the Inland Revenue Trusts Director's office at Bootle, where the Revenue's Section 660A "Technical Adviser" resides. Another fortnight passed by and the Revenue wrote again: the investigation had been dropped. Relief all round! Fortunately they were insured with Qdos Consulting.
Editors note (Feb 2012):
The original settlements legislation dates back to the 1930s and was subsequently updated first in 1988, when it became the more familiar Section 660. It was changed again in 2005 when it was updated and rewritten into its current form as Section 624 of the Income Tax (Trading and Other Income) Act (ITTOIA) 2005. See more information on the current settlements legislation.