On budget day itself, HMRC was granted leave to appeal to the House of Lords in the notorious Jones v Garnett test case surrounding the S660A settlements legislation for husband and wife companies.

This was largely expected following the taxpayer winning at the High Court. The Professional Contractors Group that has been funding the case for Mr & Mrs Jones has confirmed it will continue to do so.

The case revolves around income being shifted from a high earning to a low income spouse through the use of a personal service company where the shares are divided between the spouses to allow dividends to be paid out to the low earning spouse in order to avoid higher rates of tax. With the taxpayer winning the last round of the case, the law as it stands is in support of the taxpayer but until the outcome of the House of Lords decision which is likely to be many months away, there is still uncertainty in this area. Even if HMRC were to win, there would remain a great deal of uncertainty as many husband and wife set-ups will exist that are similar but different to those of Mr & Mrs Jones and in such a finely balanced case, slight differences can produce a different result.

Let us hope that Mr & Mrs Jones finally win in the David & Goliath confrontation.

As always, please contact us for advice in your own situation.

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