Journal :: Section 660 - Round One to the Revenue

Published: October 8, 2004
Author: Graham Dragon
Category: Tax
Permalink: Section 660 - Round One to the Revenue

Many of you will be aware by now that Inland Revenue has won an important case before the Special Commissioners ? Arctic Systems. Or SPC00432, Jones v Garnett to use its official title.

This is a landmark case for a number of reasons. Firstly because it is the only one I recall in which the two Commissioners had diametrically opposed opinions and the Chairperson had to use her casting vote for a decision even to be reached. But more importantly because it has now cast in doubt the legitimacy of many apparently innocent spousal share arrangements.

The decision was announced at the end of September, but the full findings of the Commissioners were only published today (Friday). You have probably therefore heard about the case but not yet read any in depth analysis. I have read the full decision very carefully and have to say there are quite disturbing implications for those of us who own shares in our companies together with our spouses, or who advise clients in that situation.

What is quite clear is that if the decision stands, we will have to exercise very great care in the future about how we structure the ownership of small family companies. One key factor would seem to be that we should ensure both spouses are Directors, not just shareholders, as this would undercut much of the argument made by Dr Nuala Brice, who found in favour of the Revenue. It may also be the case that adopting a ?below market rate? salary and high dividend policy will now be quite a dangerous strategy in a small family company. Good news, perhaps, to those of us still trying to sell pensions under pre A-Day rules. Although the question of what constitutes a ?market rate? salary is likely to become a legal minefield.

Of course, Mr & Mrs Jones have the right of appeal, and I would be very surprised if they did not exercise this right. Dr Nuala Brice was overturned in both the High Court and the House of Lords in Jerome v Kelly, a Capital Gains Tax case which also went before the Special Commissioners, and she did not have a diametrically dissenting opinion in that case.

I will certainly be looking at the Arctic Systems case and Section 660, and how it effects us as Financial Advisers in my Technical Day on Corporate Taxation on 10th November, as well, of course, as covering many other relevant corporate tax issues.

Found this article helpful?

Why not sign up for our Journal to have articles like these emailed to you regularly so you can stay ahead of the game. Alternatively, continue reading our Journal Archive.

About Graham Dragon

Note: We do not accept liability for the content of our e-mail Journal or for the consequences of any actions taken or not taken by yourself or any third party on the basis of the information provided. We are unable to advise you on tax matters. If you wish to obtain further information or help on this or on any other tax matters you should consult with a tax accountant or other suitably qualified and experienced tax professional.

Share This Article

About the Adviser Breakthrough Journal

Adviser Breakthrough Solutions provides the IFA community with a FREE and easy way to keep ahead of the game. Subscription to this journal is FREE. To sign up simply enter your name and email address below.

View Journal Archive

Journal Categories

Back Office (10)

The Back Office Tip of the Month is your opportunity to find out what is working well for other advisers, and save having to reinvent the wheel yourself. It will cover the broad spectrum of the ways in which successful practices organise themselves, as well as some of the industry specific processes which help make our jobs easier.

Client Care (7)

We all want to ensure we continue to give the very best service to our clients.

In the Client Care Tip of the Month we will share ideas other advisers have found help them to maintain excellence in the ways they look after their clients.

Marketing (16)

Any business that wants to survive has to get its marketing right. In the midst of an economic boom, plenty of businesses go bust; and in the midst of a recession, plenty of businesses grow from strength to strength. The difference between the two types of business is almost invariably linked to their marketing.

In the Marketing Tip of the Month we will share with you some marketing ideas successful advisers are using right now to ensure their practices not only survive, but thrive.

Money Making (6)

As a financial adviser you are not here to practise an interesting hobby. Your practice is a business. A business which should provide you with the income you want.

The Money Making Tip of the Month recognises this, and will provide you with ideas which you can adapt to ensure you really get the income you want out of your practice.

Motivational (3)

It is a fact of life that the more motivated we are, the more we can achieve. But it also seems to be a fact in our industry that wherever we turn we see news and gossip that demotivates rather than motivates us.

The Motivational Tip of the Month is intended to reverse that negative trend. It will be a reminder of just why we joined our profession in the first place and is designed to inspire you to achieve the great things of which you really are capable.

Tax (76)

Most clients recognise the value of proper tax planning. They may rarely act on the tax advice you give them, but they appreciate the fact that you gave it to them anyway. It probably puts you head and shoulders above any other financial advisers they may have met, and reinforces the fact that you are a professional who is there to help them.

Each month we will give you a tax tip you may wish to slip into your conversations with your clients, or even include in your newsletter to them.

Time Management (3)

Whoever your hero in life may be, whether it is Bill Gates, Warren Buffett, Leonardo Da Vinci, or Mother Teresa, that person had exactly the same number of hours in their day as you when they achieved greatness. The big difference is how they used those hours.

The Time Management Tip of the Month will share ideas you can put into practice to squeeze more value out of your day.