Section 660: surprise climbdown in recent case

IR35 Test

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.

The Inland Revenue created a surprise at the start of the landmark "husband and wife" tax case yesterday when it reduced the £42,000 it has been seeking in back taxes.

Special tax commissioners, sitting in London, were told the Revenue was no longer claiming retrospection in the tax bill sent to Geoff and Diana Jones, who run Arctic Systems, a Sussex-based IT business.

They had been seeking taxes covering a six-year period but the commissioners heard the demand had been dropped. They were not given any explanation.

It was not clear whether the climbdown is limited to the Jones case or the thousands of other small businesses that are waiting on tenterhooks for the outcome. A Revenue spokesman said there would be no comment until the end of the case, which may go into a third day tomorrow.

Observers feel the gesture may be limited to this case because the Revenue stands to collect millions of pounds from similar partnerships if it wins.

The Revenue has alarmed small businesses with its demand that Mr and Mrs Jones are liable to pay extra tax because of the way their partnership and dividend payments are structured. Mr Jones generates most of the income, while his wife administers the company. By paying a dividend out of profits and steering some of the husband's income to his wife, the couple have been able to reduce their tax bill.

The Revenue maintains that the dividend was a device for switching income from an earner to a non-earner and was taxable.

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.


Alliance Accountants

Published: Tuesday, June 15, 2004

© 2014 All rights reserved. Reproduction in whole or in part without permission is prohibited. Please see our copyright notice. If you want to use any content you have seen on this site then please request our media pack and ask for details of our Content Licencing Service.

Inni Accounts


Readers Comments...


  
Bookmark and Share
  
     
  

Section 660

Related Guides

Section 660

  
  

Latest Site Updates

Contractors gain some certainty as the Scottish referendum rejects independence Contractors gain some certainty as the Scottish referendum rejects independence

Contractors will gain some certainty following Scotland’s decision to stay in the UK, however further devolution of powers such as tax is anticipated.

ContractorCalculator: Contracting news in brief – 19/Sept/2014 ContractorCalculator: Contracting news in brief – 19/Sept/2014

News this week covers: Scotland’s contract market; financial sector hours; self-employment increase; IPSE survey; HMRC targets; and new FCSA member.

Contractors in the financial sector benefit from flexible working, despite long hours Contractors in the financial sector benefit from flexible working, despite long hours

Financial contractors often work well over their contracted hours but benefit from flexible working conditions, shows a new survey by Morgan McKinley.

What contractors can learn about control from HMRC’s False Self-Employment guidance What contractors can learn about control from HMRC’s False Self-Employment guidance

Contractors are not directly affected by the False Self-Employment legislation but HMRC’s guidance provides important insights about applying control.


  
  

Twitter

Follow Us On Twitter


  
     

  
  

Contractor solutions

Orange and Gold Accountancy Limited IR35 Test Clever Accounts Accountants Checklist Alliance Accountants Contractors Handbook
  
  

Contractor solutions

InTouch Accounting

Perfect mix of technology & personal service for only £92 per month.

Need an accountant?

Comprehensive service for £59 per month. Call now for a FREE consultation.

Clever Accounts

Complete contractor accounting service. 24/7 online access. £69 pm!

Parasol

The UK’s largest employment organisation - 0% risk, 100% compliance

Contractor Accountant

Free consultation, incorporation and IR35 reviews. Find out more…

Contractor Angels

More than just an Umbrella. Retain up to 90% of your earnings.

NA D J Colom Accountants Parker Cavendish Bedouin Group Contractor Financials NewsNow
  
Caprica Accountants Parker Cavendish Contractor Insurance Life Insurance

  

The UK's leading contractor site. Independently audited traffic (ABC) – 131,456 monthly unique visitors.