Section 660 is not new, says contractor who blames aggressive share splits

It has widely been reported that Section 660 is being re-interpreted. This is not the case. Accountants have been aware of this legislation for a long time, but some have chosen not to share its likely impact with their clients

I recently wrote to my MP, Mr Alan Simpson, Nottingham South, expressing my concern that the government has been creating business uncertainty, especially in the IT arena. I cited IR35 and Section 660 as examples.

Alan passed my comments on to Gordon Brown for comment and when he passed the buck, I received a reply from Dawn Primarolo. The main thrust of her reply was towards Section 660, in which she banged the government/IR gong about it not being a new interpretation of old legislation and she referred to an article in "Taxation" magazine, October 1996, which covered this subject.

At this point I contacted my accountant, who informed me that "Taxation" magazine is a magazine for accountants, but that he did not recall the article. (Can anybody get hold of it now?) He did tell me, however, that although he considers the legislation to be archaic, he has long been aware that an unreasonable share split is likely to interest "Hector".

When I first started contracting in 1989, I was advised that a share split of 8:2 was reasonable and that I should not pay myself a peppercorn salary. This is still the case for me today. There are, however, many accountants who have advised a more aggressive strategy. Let's try a 50:50 share split. Let's pay a minimal salary. It is these cases that have firstly caused IR35 to be created and latterly have caused Section 660 to be resurrected.

For all those contractors who have effectively created this problem by "trying it on", often with guidance from dodgy accountants, I have to say that I have no sympathy for you. While, I suspect, a majority of contractors have played it safe, you have brought Hector's spotlamp onto the whole community and now none of us feel safe.

The main problem with Section 660 is that it has to be interpreted. There are no hard and fast rules. As such, the revenue are free to interpret it as they wish. It is uncertain legislation.

The best way for UKTECH (et al) to provide a service to the contractor community would be to talk to accountants and to the revenue to nail down a few guidelines as to what is acceptable and what is not. IR35 is now considered, by many, to be a "voluntary tax", so let's get the same certainty into Section 660!