Arctic: Accountants still 'unsure' of advice
The recent Arctic Section 660 appeal could still leave accountants unsure how to advise small businesses, according to a leading tax body.
The High Court case, which is seen as a landmark for small businesses owned by husbands and wives, was a victory for the Inland Revenue and described as a 'black day' for small businesses.
The full judgement could take some time to be published as the judge took the unusual decision of reading out his decision from his own notes which he corrected as he progressed and warned that the final version could contain some amendments.
However, the substantive issues will remain the same and it will be seen as a resounding victory for the Revenue, with possibly some unhelpful comments for small businesses.
The Tax Faculty (of the Institute of Chartered Accountants in England and Wales) has already expressed concern that its members, who advise small businesses, could still be unsure of the situation.
The Tax Faculty advised its members: "Regardless of whether this case is appealed (which will come down solely to whether the taxpayer can raise the finance) it is clear to us that we have a lot of members who will read the report and still be unsure what side of the line their clients fall - the case seems unlikely to provide real clarity on whether you are a 'good tax planner' or an unacceptable tax avoider in relation to the advice given to your clients.
"The case is likely to refer to market salaries needing to be paid to the active spouse and other rather meaningless phrases that won't help our members identify whether they have problems with their clients or not. We need to know how HMRC (Inland Revenue) will use this case, the parameters it will use and the guidance it will give to its staff. We also need to clarify the question of going back to earlier years."
Law Report
The Incorporated Council of Law Reporting has summarised the verbal court decision in the recent Arctic Systems High Court Appeal.
Jones v Garnett (Inspector of Taxes) - Arctic Systems. Incorporated Council of Law Reporting