Arctic: The uncertainty continues

Last month, it was confirmed that the landmark Arctic Systems Section 660 case will be further appealed after the defeat in the High Court.

Arctic Systems, owned by husband and wife Geoff and Diana Jones, is seen as a test case for tens of thousands of other small businesses who could find themselves owing a considerable amount of tax if the case continues to go in favour of the Revenue.

The Revenue had already won in a controversial Special Commissioners decision and, more recently, at the appeal in the High Court.

Lack of clarity

Carl Whittaker of Qdos Consulting adds his view:

Carl Whittaker"On the 8 June 2005 an appeal was lodged against Mr Justice Park's decision in the High Court dated 27 April 2005. This is a brave move by Geoff Jones to continue his fight to challenge the Revenue's opinion that the dividends from his company paid to his wife should be assessed on himself.

"The case will now be heard by the Court of Appeal and the outcome is again eagerly awaited by many in the business community who may be affected by the final decision.

"Should either side disagree with the Court of Appeal decision the final port of rest for Arctic would be the House of Lords.

"The decision to take the matter further is presumably based on the fact that the two Special Commissioners disagreed so fundamentally, clearly illustrating that there is a clear case for disagreeing with the Revenue opinion, as one Special Commissioner indicated.

"We must again wait for the final outcome, which extends the period of uncertainty for those concerned. We must also note that the comments of Mr Justice Park will not now carry the same 'weight' had his decision not been subject to appeal.

"Again businesses are faced with the decision of what action they should take in the meantime. It may be prudent for those affected to still give some regard to Mr Justice Park's comments with regard to market value of the contribution of both directors.

"It would be of great benefit to all if the Revenue would finally accept the lack of clarity of S660A and also the unfairness of taking their attack on businesses before April 2003 and Tax Bulletin 64. It is obvious that the wording and interpretation of S660A is less than clear and so it would be of assistance to all concerned if new legislation was drafted to become law in April 2006.

"This would hopefully leave us with a set of understandable rules for the future and remove the uncertainty of those businesses that are currently subject to a challenge from the Revenue under the current 'grey' S660A legislation."

Protection and information

More information about Section 660 and the Arctic case is available in UKTECH's Section 660 resource.