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Husband and Wife Businesses Under Attack

The recent, widely-publicised judgement against Geoff and Diana Jones and their company Arctic Systems Limited has caused worry for those in business with their spouses.

The split decision by the Special Commissioners was based on interpretation of Section 660A of The Taxes Act 1988. This legislation has been around for a long time, and deals with family settlements. The Revenue’s sudden decision to use it against family companies gives it a whole new angle, however.

The recent ruling affects husband-and-wife businesses where one partner is not active in the business, yet both draw dividends so that their combined tax bill is less than if the ‘working’ partner had received all of the dividends. This was the situation for Geoff and Diana Jones who are now being assessed for extra tax on dividends they received from Arctic Systems.

However, the ruling does not necessary mean additional tax bills for every family-run company. The Jones’s are taking the case to appeal and bearing in mind that the commissioners were split two-to-one in their judgement, the appeal could go either way.

In any event, the ruling will only apply to certain businesses. It is therefore essential for each husband-and-wife company to take specific advice according to their circumstances. Please contact us if you wish to discuss this.

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