Section 660: Accountants fight back (9)
The accountancy profession is preparing to mount a fight back against the recent Section 660 ruling in favour of the Inland Revenue that could force hundreds of thousands of family businesses to pay an extra £1 billion in tax.
According to reports in the Telegraph, the accountancy bodies have formed a pressure group known as the 660A Group. It is scheduled to meet the deputy chairman of the Inland Revenue, David Hartnett, in the next few days to complain about the way the Revenue treats family businesses.
This follows the Arctic Systems case in the Special Commissioners which found in favour of the Revenue's claims to tax dividends paid to husbands and wives who own a small business as if the full amount was paid to the higher tax payer.
Accountants, many of whom advised their clients to set up companies in this manner, have been highly critical of what they see as a new and unfair interpretation of an old law.
660A Group
The 660A Group is made up of representatives from professional bodies including the Association of Chartered Certified Accountants (ACCA), the Chartered Institute of Taxation (CIOT), and the Institute of Chartered Accountants in England and Wales (ICAEW).
Revenue has all avenues open
Chas Roy-Chowdhury, of the ACCA, was reported as saying: "There may be as many as 800,000 such family businesses in the UK. We want more clarity from the Inland Revenue. At the moment, it has all avenues open to it because the law is so uncertain. We think many family business owners will be providing information on their self assessment tax returns that they need not provide, and will end up paying too much tax."
There has also been criticism that this ruling ignores the contribution a spouse can make to the business and is contrary to other areas of family law.
Mr Roy-Chowdhury said: "Many will be able to prove quite easily that wives are legitimately helping to run the family business - doing some typing at home or chasing up invoices ought to be enough. The problem is that there is no clarity on this from the Revenue.
"Although keeping house is not considered enough, I do think it is relevant. It is recognised in the divorce courts through the pensions splitting legislation, and it is recognised in the tax credit system. It is grossly unfair that the Revenue can sideline what the wife is doing to enable her husband to go out and run the business."
Full article in Telegraph: Taxman under fire on family ruling