News & Press
Brookson Awaits Arctic Systems vs HMRC Verdict
19 June 2007
Brookson has been following the landmark tax case between Geoff Jones of Arctic Systems and HM Revenue & Customs, which was heard by the House of Lords on the 5th and 6th of June.
The hearing was scheduled for three days, however finished early, and was heard by Lord Hoffman, Lord Hope, Lord Walker, Baroness Hale and Lord Neuberger. It is hoped that a judgement will be handed down in the next few weeks, before the House of Lords goes into summer recess in late July.
The case is of great interest to Brookson, contractors and small businesses across the UK, as Geoff and his wife Diana have been fighting the HMRC since they took them to court over a back-dated £40,000 tax bill for alleged ‘tax evasion’ in 2005. Like so many other small businesses across the country, the couple set-up their own limited company with a share each, and then drew salaries and split the profits to maximize the amount of money they could take home. This, the Joneses were advised by accountants at the time, was well within the law and the application of s660A.
However, HMRC alleges that the couple had taken this mechanism too far, and that it amounted to tax evasion, and consequently took the Joneses to court in 2004 – a case which the couple lost. Geoff and Diana then brought the case to the Court of Appeal which overturned the ruling in 2005. However, the HMRC appealed against that decision to the House of Lords, which is due to hand down its judgement in the next few weeks.
The HMRC’s case centres on Mr. Jones’ salary which, it is alleged, was undervalued as he was a higher rate tax payer, and whether this arrangement contains an element of ‘bounty’.
If the ruling goes against the Joneses it will have far-reaching consequences for an estimated 30,000 other ‘husband and wife’ businesses in the same situation, who may discover that they also owe back-tax to the Revenue.
To keep abreast of developments on this case, Brookson will continue to keep this website updated with the latest news.
