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Uncertainty over tax test case for family business

Hundreds of thousands of small family businesses still face uncertainty after three days of legal argument in a tax test case that could have massive implications.

Geoff and Diana Jones from West Sussex, who run Arctic Systems, were presented with a £42,000 tax bill after the Inland Revenue decided to implement tax legislation that dates back to the First World War.

The couple, who have been supported by the Professional Contractors Group, were given some relief when the Inland Revenue announced at the eleventh hour that it was dropping its claim for six years’ worth of retrospective tax under the S660A rule.

It will, however, be at least six weeks before the couple knows the outcome of the hearing – a judgment that will be closely scrutinised by tax experts, accountants and their professional indemnity insurers as well as hundreds of thousands of similar husband and wife businesses.

After the hearing, PCG chairman Simon Juden said, “It seems almost unbearable for Geoff and Diana to have another few weeks of uncertainty hanging over them and there is no doubt it adds to the unfairness of the situation in which they find themselves. We share their relief that the Revenue decided against pursuing the claim for retrospective tax but that doesn’t help clarify the position for so many people like the Joneses.”

PCG is firmly of the belief that if families share the risks of setting up and running a business, then they should share the benefits and we do not believe it is the Government’s intention to dissuade people from playing a vital role in the local and national business community.”

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.

Published: Thursday, June 17, 2004

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