Transcript of Section 660: BBC Radio4 Today Prog.
Section 660 - the 'married couple's business tax' was featured on BBC Radio Five and the business section of Radio Four's flagship morning news programme, Today Programme. UKTECH's managing director, Andy White, explained the situation facing freelancers as a result of this new 'retrospective stealth' tax. The transcript of the Today interview is below.
Greg Wood, Today: "Half a million family businesses face a new tax bombshell from the Inland Revenue. Many of these businesses reduce their tax bill by transferring profits often in the form of share dividends from the earner to the partner who is in a lower tax bracket, It is something that has been going on for decades. But now the Revenue appears to have reinterpreted the relevant part of the tax code called Section 660 and it's sending out demands for thousands of pounds in taxes dating back several years -- Geoff Jones is a computer consultant, out of the blue he received a tax demand for £42,000."
Geoff Jones, computer consultant:"The Inland Revenue is claiming that my wife was not entitled to dividends and that any money that she had received should have been taxed against my higher rate. Consequently this unexpected bill came, backdated over six previous years. Obviously a major shock to us."
Today: "I am joined by Andy White, from UKTECH, the UK's largest online network for freelance workers. Andy, is Geoff Jones an isolated case?"
Andy White, UKTECH: "No, I think Geoff Jones represents the tip of the iceberg. Potentially two and a half million family businesses will need to check whether they are affected and, as you said, probably half a million will be affected.
Today: "But what types of businesses? Are we just talking about freelance workers or is this a typical set up for a small business?"
Andy White, UKTECH: "It's a typical set up for business and increasingly this economy is being driven by knowledge based businesses - with low asset investment and a high return on investment. This is very much the modern economy being hit by this latest retrospective stealth tax.
Today: "We spoke to the Inland Revenue they said nothing has changed."
Andy White, UKTECH: "The legislation has been around for some time but the interpretation of it has changed. That was outlined in guidance issued by the Inland Revenue only last week."
Today: "What's wrong with the Inland Revenue enforcing the existing rules properly as they would see it?"
Andy White, UKTECH: "Well I think this is a situation in which knowledge-based businesses are different than other businesses. The Revenue enforcing it in this way is creating a situation of real uncertainty for businesses who are now facing situations - not only in the future but in the past - for tax liabilities they had no knowledge of."
Today: "Could this put them out of business?"
Andy White, UKTECH: "Absolutely, a tax bill of £42,000 hitting your door mat for a small business would put you out of business."
Today: "Why is The Revenue doing this? Is this some sort of stealth tax then?"
Andy White, UKTECH: "At the end of the day, looking at the economy you have public expenditure going up and tax revenue falling and this latest tax revenue is sweating the assets of the tax code to try to bring in more revenue."
Today: "So how much could it raise in total if small businesses are squeezed in this way?"
Andy White, UKTECH: "Potentially this is a one to two billion pound retrospective stealth tax."
Today: "What do people do now if they, like Geoff Jones, they get the £42,000 tax demand through the letter box?"
Andy White, UKTECH: "Well this has only just hit the news and the first thing businesses need to do is check to see if they are affected. They need to know if they need to worry about it or not and we've got a Section 660 information centre on the site which will hopefully give them some information. That's the first thing to do, make themselves aware of the problem and understand what it means to them."
Today "Hopefully, they are aware now. Andy White from UKTECH, thank you for that."