PCG to appeal Arctic in wake of new revenue guide

The Professional Contractors Group (PCG) has expressed its frustration with the Inland Revenue’s new “Guide to the Settlements Legislation for Small Business Advisers”, published today, and has confirmed its decision to appeal the Arctic Systems case at the High Court.

The information note issued by the Revenue refers to the case and the “recent Special Commissioners decision that the settlements legislation can apply to small companies owned jointly by a husband and wife.” It also claims that the settlements legislation “does not affect ordinary businesses”.

Reacting to the information note and publication of new guidance, PCG chairman Dr Simon Juden said, “Many accounting and legal experts have cast doubt upon a judgment which found in favour of the Inland Revenue thanks to a casting vote, when the two Special Commissioners could not agree on one single aspect of their assessment. Now the Revenue has issued new guidance, confirming its stance with regard to the case and advising any taxpayers whose circumstances are similar to those of the Joneses to disclose this in their self-assessment returns.

“This guide fails to address key elements of the vagueness surrounding this measure and does little to mitigate the uncertainty for small family business owners, who will no doubt be surprised to hear that they are not classified as ‘ordinary businesses’”, he continued. “We will carry on our fight for the right to transparent and easy taxation at a fair rate for people who choose to work for themselves, and we stand by our belief that where families share risk, they should also be able to share reward, as advocated on the Government’s Business Link website.”

Anne Redston, tax partner at Ernst & Young, said, “There is very little new in this guide and I am extremely disappointed that the Revenue have not used this opportunity to clarify their guidance. The fragments of new information it does contain only serve to emphasise the difficulties faced by small businesses who want to find out whether or not the Revenue considers that the legislation applies to them. It seems that the uncertainty surrounding S660A will be resolved only when the Joneses’ case is successfully appealed.”

PCG believes that around 200,000 small business owners could be affected, and is calling for public support to help fund its appeal of the Arctic case. Details of how to donate are available via its website at PCG.

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: Friday, November 19, 2004

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