High Court ruling will affect UK family run companies

The Revenue have for a long time been unhappy with family run businesses where the shares are held by a husband and wife, on the basis that there is a suspicion that one of the spouses is not in fact contributing to the business.

The Revenue took action against a company in Cumbria called Arctic Systems, co-owned by Mr & Mrs Jones. In the High Court the Revenue claimed that Mr Jones had unfairly transferred part of his income away from himself to his wife, in order to benefit from her lower-rate tax status. They won and the couple will have to pay the back-dated tax bill sent to them of £42,000, representing 6 years of trading.

Accountants are warning clients whose business is held 50/50 between husband and wife that they may be affected by this ruling.