Tax Update - Arctic Systems hearing postponed

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The Professional Contractors Group has stated that the House of Lords appeal hearing in the case of Jones v Garnett will not now be heard until after next year's income tax self-assessment deadline has passed. It is unclear when the appeal will be heard but a date after 31 January 2007 is now certain.

Jones v Garnett, or Arctic Systems Ltd as it is often better known, is the case concerning the operation of the settlements legislation. This used to be in s660A, ICTA 1988 and is now in s619 onwards of ITTOIA 2005.

The legislation is about ineffective dispositions of income which, if applicable, could see dividends, for example, reallocated from a lower rate taxpayer to a higher rate taxpayer. Although it is not solely applicable to husband and wife owner-managed businesses, many of those types of businesses have been holding their breath awaiting the outcome of this decision.

While a swift conclusion to Jones v Garnett will hopefully bring much needed certainty to this area, those wondering how to self-assess can still rely on the Court of Appeal decision in this case, which went in favour of the taxpayer. Anyone who has facts akin to Mr and Mrs Jones can file in the knowledge that currently the settlements legislation does not apply.

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