WA53

Landmark ruling on "husband and wife" tax

A landmark tribunal ruling in favour of the Inland Revenue’s so-called ‘husband and wife’ tax has dealt a serious blow to many family-run businesses.

The controversial decision by the Inland Revenue to reinterpret Section 660A, which covers the transfer of income from one person to another, has led to criticism from some tax experts in recent months.

The ruling means that Geoff and Diana Jones of Arctic Systems, an IT consultancy, will face a substantial tax bill. The ruling could also set a precedent for future cases.

While the Revenue insists that the ‘settlements legislation’ has been in place for many years, experts have warned that the new interpretation of the legislation could leave many small businesses struggling to cope.

Dr Simon Juden, Chairman of the Professional Contractors Group, which supported the couple’s case, said, ‘We believe the current application of Section 660A to be incompatible with the concept of Self-Assessment, and the principle of independent taxation of spouses’.

‘This result is bound to make a lot of people think twice about spreading their wings and starting a family business’, he added.

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