legislation
update
victory for family businesses as PCG and Arctic win
appeal |
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Geoff
Jones of Arctic Systems won his long running landmark
Section 660A appeal on 15 December 2005, which was
supported by the Professional Contractors Group (PCG).
Welcoming
the judgment, PCG chairman Simon Juden, commented,
"This is the best Christmas present for the
UK’s small family businesses. It means proper
recognition for the hundreds of thousands of people
who choose to run their own businesses, share the
burdens and the hard work with their partners, and
rightly expect to share the profits of their efforts."
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Arctic
Systems were pursued by HMRC as a result of the low salary
paid to Mr Jones for his services as an IT consultant. They
used Section 660A Income and Corporation Taxes Act 1988,
to prove their source of income as being a settlement.*
*A settlement
is an arrangement made by one taxpayer (the settler), under
which another taxpayer (e.g. spouse) receives income which
has not been fully earned and is deemed a ‘bounty’
(e.g. dividends).
The
Chancellor of the High Court decided there was no arrangement
amounting to a settlement because all that was present in
the instant case was no more than a married couple becoming
involved in each other’s commercial business on a
non-bounteous basis.
Furthermore,
there was no settlement because it was not possible to identify
income arising from the arrangement and the property comprised
in the arrangement. In the present case the arrangement
was the acquisition of the share by Mrs Jones and the company
structure whereby Mr Jones had the other share and was the
sole director. In the context of a new company that had
yet to establish itself the £1 she gave represented
full value particularly bearing in mind that she also made
a substantial and valuable contribution to the running of
the business.
In conclusion,
his Lordship said there was no arrangement; there was no
outright gift and had there been, then the share was not
substantially a right to income.
Reproduced with permission of PCG.
summary
HMRC
have chosen to appeal, but the verdict as it stands is likely
to result in significant revision of the existing guidance
on settlement provisions.
Every
contractor should, of course, take professional advice in
the context of their own individual circumstances, but worthy
of further investigation is the outright gift of ordinary
shares, in cases where the non-fee earning spouse wishes
to share their spouse’s income, but doesn’t
play any part in the business.
disclaimer:
TAC
Europe has tried to ensure that the information in this
briefing is correct but does not accept liability for errors
and omissions.
This
briefing is intended to provide general information only
and does not attempt to give advice that relates to specific
circumstances. Please forward any questions to the PCG whose
website address is shown below:
www.pcg.org.uk
holiday
pay update
Union
leaders have recently called for Government action regarding
holiday pay for temporary workers and in particular, the
approach taken by many recruitment companies of ‘rolling
up’ holiday pay where holiday entitlement is included
into the individual’s pay rate.
The
view from the European Court of Justice is that ‘rolled
up’ rates must not be used as a means of avoiding
payment or encouraging individuals not to have the required
amount of annual leave. Both of these practices could have
serious implications for candidates, clients and recruitment
companies alike.
TAC
Europe provides separate paid holiday leave for our contractors
and we believe this reflects both
the spirit and the intent of the Working Time Directive.
Note
: If you are already a TAC Europe contractor, you can see
how much holiday leave you have accrued via your payslip.
If you you have any questions please contact one of our
recruiters on
01256 365700 or visit us online at www.taceurope.com
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