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Geoff and Diana Jones have won their case against HM Revenue and Customs
(HMRC) in a landmark victory that could cost the Treasury hundreds of
millions of pounds in lost taxes.
HMRC had objected to the way in which the couple used their salaries and
dividend payments to reduce their tax bill: both drew relatively small
salaries and shared the remaining £60,000 in dividends, even though
Mr Jones carried out the majority of the earning activities while his
wife was responslble for administration a few days a week. The couple
paid reduced tax and national insurance contributions because of their
arrangements, and a greater portion of the profits where paid to Mrs Jones
to benefit from her reduced tax rates.
HMRC ruled that Income from company divldends received by a non-earning
or low-earning spouse who is co-owner of a business should be taxed at
the same rate as the primary earner's income. This decision was upheld
In a HMRC Trilbunal, then in the High Court, but has now been overturned
by the Court of Appeal. "This is a vindication for many small businesses
in terms cf their ability to arrange their affairs in a tax-efficient
manner," said Kevin Nicholson, UK head of enterprise at PriceWaterhouseCoopers.
HMRC said: "if necessary, revised guidance will be released shortly
to confirm the position for people filing self- assessment returns in
January".
The Professional Contractors Group, which funded the Joneses' case, estimates
that many firms will benefit from thee ruling and sets the amount of lost
tax revenue at £lbn.
If you feel you may have a problem with this issue and wish to discuss
it call Stuart Atkinson
on 01482 226791
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