July 26, 2007

Artic Systems wins tax case in Lords

by Brian Turner

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SME's not worried on interest rates

Article Systems have won their landmark case against HM Revenue & Customs (HMRC) in the House of Lords.

The case began in 2003, when the Inland Revenues disputed how the company distributed its dividends.

While Geoff and Diana Jones were both co-owners of the business, the HMRC made the surprising decision to claim that in receiving dividends from the company, Diana should have been paying income tax - when dividends are normally exempt from this.

In effect, HMRC claimed that the individuals and company were involved in tax evasion, rather than tax avoidance.

While Artic Systems had previously won judgement in their favour in the English courts, HMRC had appealed to the House of Lords, where today they lost the case, and any attempt to further chase up the case.

However, while the case may have been won against the tax service, HMRC made it plain they regarded the arrangement of income to be “unfair”, and future legislation in this area is expected, which is likely to squeeze Britsh small businesses with yet further tax happy moves.

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