Prisk asks Primarolo to explain the Revenue's new Section 660 approach

Mark Prisk MP, Shadow Financial Secretary to the Treasury, has written to Dawn Primarolo MP, Paymaster General, to ask for an explanation of the Revenue's new approach on Section 660 (copy attached)

In addition the All Party Parliamentary Small Business Group have distributed the UKTECH briefing paper via the members' intranet system.

Letter from Mark Prisk MP

Attn: Dawn Primarolo MP

Paymaster General

April 2, 2003.

Ref: s.660, Income & Corporation Taxes Act

I have received a series of representations about a change in the way the Inland Revenue taxes small companies, run by married partners. I understand the Revenue has in some cases re-defined a wife's dividend income from a small limited company, as being that of her husband. The Professional Contractors Group, UKTECH, and several independent consultants, including my own constituent Mr. XYZ, have expressed grave concern about these changes and the way in which they have been introduced.

Having reviewed several of the cases and the representations made by these leading trade bodies, it would seem to me that these changes could affect millions of family businesses. The problem is compounded by the retrospective way in which the Revenue is now applying this legislation. I understand that in one case a couple are facing a tax demand for £42,000, stretching back over six years.

Why is the law now being applied differently and in contradiction to advice previously provided by the Inland Revenue? Equally, why has no guidance been issued prior to these changes being introduced? Is this not a breach of Code of Practice 10 and the Revenue's Code on Consultation?

Does the Government not recognise that this legal reinterpretation undermines its efforts to encourage incorporation for small businesses, given that the vast majority of enterprises involve husband and wife?

Further, can you explain why a wife's dividend income should now be treated as being that of her husband? The exemption for transfer between spouses is established clearly in law and if this new approach is pursued it could represent an unwelcome retreat from the principle of the independent tax treatment of women.

After the Government's imposition of IR35, this new interpretation of s660 is yet again seen by many small firms as an attack on enterprise. I do hope that you will be able to explain these changes and why you have decided to support them.

Mark Prisk MP

Shadow Financial Secretary to the Treasury c.c. PCG, UKTECH, Mr XYZ esq.

Links

UKTECH briefing paper