Arctic case: What next for settlements? (8)
Independent adviser, Simon Sweetman, one of the country's leading Section 660 experts and a member of UKTECH's Ask An Expert panel, reviews the implications of the recent Section 660 (Arctic Systems) case for small businesses.
Simon Sweetman says:
"The Special Commissioners have decided against the taxpayers in the case of Jones v Garnett (the Arctic Systems case).
"This has caused further confusion rather than clarifying the issue! The disagreement between the two sitting Commissioners means that this has little general effect.
"A decision by the Special Commissioners is advisory rather than binding, so at this stage the Joneses have lost their appeal but it makes no immediate difference to anybody else because we have two Commissioners who have disagreed on almost every point.
"We will now have to wait for the case to go to the High Court. I do not remember this situation - the need for a tie break - happening before! What little we know suggests that the decision which counts appears to place considerable weight on the fact that Mrs Jones was not a director (and so not responsible for the voting of dividends) and the provision that said she had no absolute right to transfer her share.
"These are special features of this particular case and will not be present in all cases, as normally the secondary shareholder will also be a director (and in some it will be only the secondary shareholder who is a director with the primary shareholder being a mere employee).
"About the only thing that both Commissioners seem to have agreed on was that there was an "arrangement": but they disagreed as to whether in this case that constituted a settlement and, importantly, where the "arrangement" stopped: did it include the decisions about the level of salary and dividend year on year?
"So the advice for those engaged in argument with the Revenue is to hang on in there: there may be Inspectors who will suggest that the case is won and that is that! We must hope that resources will be available to take this appeal on at least to the High Court."
Simon Sweetman
Sole practitioner
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