Section 660 defeat: It was a penalty shoot out (5)
The 'split decision' in the Section 660 Arctic Systems case where the two Special Commissioners could not agree with each other, will lead to confusion for small businesses according to accountants Ernst & Young.
The recent landmark case involving IT consultants Arctic Systems went in favour of the Inland Revenue but only after the senior of the two Commissioners had the 'casting vote'.
It has been argued that if two Special Commissioners cannot agree the situation, then there is little hope for small businesses to operate with any certainty and clarity. In the meantime, hundreds of thousands of small businesses face the prospect of huge tax bills after the Revenue was given the green light to pursue the 'so-called married couple's business tax'.
Penalty shootout
Anne Redston, a tax partner at Ernst & Young and one of the country's leading specialists in this area, said: "This situation rarely arises, but where it does, the senior Special Commissioner carries the day. In this case the senior commissioner agreed with the Revenue.
"Deciding a case of this nature by a casting vote is the equivalent of deciding the World Cup by a penalty shoot out. The Commissioners could not agree among themselves whether the taxpayer should win, or whether the Revenue should win, so Dr Brice, as the presiding commissioner, decided the matter.
"A penalty shoot-out is often felt to be unfair in football - but it is much more so in taxation. What are family businesses to make of a tax regime which is apparently so unclear that even the expert Special Commissioners cannot agree? How are individuals supposed to complete their self-assessment tax returns?
"We will need to examine the case further to see if helpful guidance for taxpayers can be arrived at, and of course the decision may be appealed. In the meantime any family business which thinks it could be affected by this decision should consult their advisers before taking any action to change the way they have traditionally operated and rewarded the business owners."
For further information about Section 660 and the Arctic case, see:
Section 660: Information and Protection