Section 660 – Good News For Contractors!

The long drawn out section 660 settlements legislation court case came to an end on Tuesday when the House of Lords ruled in favour of Geoff and Diana Jones of Arctic Systems Limited.

 

This means that the Revenue will not be able to use the section 660 settlement legislation to attack husband and wife companies where dividends are paid to one spouse who is not a fee earner for that company.  Clearly this is great news for businesses who have historically operated such a share/dividend structure since the Revenue will not be able use this legislation to retrospectively reinterperate tax law and seek to recover tax.
 
Looking forward, we do not believe at this point in time this decision signals a green light for shares to be transferred/issued to spouses.  Anne Redston, spokesperson for The Chartered Institute of Taxation, advises caution and reminds us – "the Lords are only ruling for the past, they are not ruling for the future".
 
In the short term HM Revenue and Customs will have to issue guidance as to how it will conclude its current enquiry cases and outline its policy on how it intends to deal with settlements and outright gifts of shares in the future.

We believe it would be premature to make any variations to shareholding arrangements until such time as HM Revenue and Customs have issued new guidance on this subject.  Once this has been done we will review and advise accordingly.