(3) Arctic: Victory reactions

The Court of Appeal ruled that the Inland Revenue made a 'significant extension' - and an incorrect one - to the Section 660 legislation in a landmark ruling which found in favour of the hundreds of thousands of married couples in business together.

In what has been seen as a test case for husband and wife businesses, the courts have now ruled in favour of Arctic Systems - the IT consultancy owned by Geoff and Diana Jones. Court 16 in the Strand was the venue this morning for the ruling. As the interested parties turned up to hear the verdict, early indications suggested a victory for Arctic Systems as 'their' benches filled with supporters whereas the Inland Revenue's side of the court remained empty.

It took Chancellor of the High Court, Sir Andrew Morritt, no more than a few minutes to deliver the decision which Mr and Mrs Jones - and many other small businesses - have waited years to hear.

Appeal

The Court of Appeal refused automatic leave to appeal to the House of Lords - but the Revenue still has the option of petitioning the

House of Lords directly if it chooses.

Of course, they still have the 'trump card' to change the legislation if they wish - but that would only affect the future and not the past - which has concerned many people who feared retrospective tax bills of up to £42,000.

Tax professionals present at the court were keen to study the 108 paragraph judgement in detail before issuing conclusive comments - but early reactions from all involved in the case were positive.

Reaction - Ernst and Young

Kevin Miller from Ernst and Young, advisers on the case said: "We need to read the judgement in detail but this is a good day for husband and wife businesses around the country.

"We need to digest the judge's comments to see what salient factors there are as to why the Revenue's case was rejected.

"This has clearly justified concerns that the tax professionals have had that the Revenue's views are at best debatable and at worst entirely unjustified.

"It will be interesting to see if the Revenue now goes to the House of Lords. Clearly their ultimate position could be to go back to

Parliament and make the legislation clearer if they wish.

"We have to hope that they now stop pursuing people for the past and clarify the future."

Reaction - Mr and Mrs Jones

Geoff and Diana Jones with Simon Juden (centre) A relieved Mr and Mrs Jones were in the Court of Appeal to hear that their years of contesting this case had finally reached a satisfactory conclusion - after previously suffering defeats in the Special Commissioners and the High Court.

Mr Jones said: "We are delighted, but not surprised. We always maintained that we did the right thing and ran our business as the Government said we should and as our accountants advised us to. We always knew we'd ultimately come through and win.

"It's good that common sense has prevailed but it has taken a long time. It should never have come to court in the first place.

"This is the end of three years of uncertainty for us – at one point we thought we'd lose our home. It's been extremely stressful and we've been made to feel like criminals, just for running our own business."

Reaction - PCG

The Professional Contractors Group (PCG), James Kessler QC, Berg Kaprow Lewis, the Federation of Small Businesses, JSA and members of the public had supported and funded the test case.

Simon Juden, chairman of the PCG, was in Court to hear the decision. Speaking just after receiving the news, he told UKTECH: "Obviously we are delighted. It is the best possible Christmas present for hundreds of thousands of husbands and wives in business together, who play such a vital part in the nation's economy.

"Couples who set up in business together share the burden and responsibility of starting a new business, so they should be able to share the rewards.

"We hope that the Government will scrap the uncertainty, unfairness and inconsistency of legislation like this, which meant that the goalposts suddenly moved for thousands of small businesses. We hope this marks the beginning of a fairer approach to tax on small businesses."

Businesses now face a higher level of certainty in filling in their end of year tax forms. Simon Juden advised: "As it stands, it is our thought that you may now share the profits."

Reaction - Nicola Ross Martin

Accountant Nicola Ross Martin from Ross Martin Tax Consultancy Limited, had received the judgement only minutes before she spoke to UKTECH. She said: "We need to read this judgement very carefully and look at the Revenue's interpretation and weigh it up.

"First impressions from it suggest that it might not address all the points but it does say that there wasn't a settlement.

"The key part is in the final paragraph where the judge thought the Revenue had looked at the legislation and made a 'significant extension' to it - which was found to be incorrect."