Reply to: 660A appeal lost

Re: You don't need to change.

I think the States has a minimum tax rate used to get wealthy people who otherwise would manipulate their bill down to zero.

Re: You don't need to change.

What I dont like about the way the IR has been going about clawing back tax is that if they had a plumber and an IT contractor side by side each earning the same amount of money they will always go after the IT contractor and completely ignore the plumber every time.

Well...thats what it seems anyways.

Perhaps the only real answer to getting people to pay the "appropriate" amount of tax is to introduce a flat rate of 20% and make it not worth peoples efforts to "avoid" paying their tax.

Im pretty sure that if the government went about it this way they would at the end of the day actually save money and increase their tax revenue.

Mailman

Re: You don't need to change.

Sort of missed the discussion on this one but for what it's worth.
This kind of stems from what we discussed some time ago on here. What the IR didn't like was the way everybody paid themselves (+ wife) minimum wage and everything else split equally in dividends.

I'm not saying that's wrong but the IR see it as a big no-no (wrongly in my opinion !).
If you (+ wife) paid yourself the market rate (that's what the IR like to see) i.e. your Mrs is seen as an equal partner. I guess the IR can't come back and say she's doing s0d all for the business.

I reckon if you + Mrs pay yourself 12k each (roughly what the IR pay their own bods). You still can take roughly 18k each in dividends before the next tax band. The fact that you + Mrs get paid the same wage could be argued in court that you're equal partners. She does everything (accounts, insurance, ringing customers, etc. etc.) apart from literally go on site.

So, make sure you and Mrs have 50/50 split of shares. You both get paid the same salary ("market rates"). Would they then still come after you with S660a ?
Don't know, but you can see where I'm coming from ? The IR won't bother "genuine businesses" - yeah right ...

Now that Liebore has won the election expect more reinterpretation of old rules
We're the easiest targets to squeeze for more tax

Disclosure Requirements

What Bradley is saying is correct. If you made full disclosure, then IR have until 31 Jan 06 for year 04-05 self assessment enquiry. If you do not make full disclosure than they can go back 6 years.

This is based on from Langham v Veltema case

Completing Your Self Assessment Return Following The Veltema Judgment
www.inlandrevenue.gov.uk/...eltema.htm

Tax bodies revise SA disclosure guidance
www.accountingweb.co.uk/c...=784&f=785

Revenue issues crucial SA disclosure guidance
www.accountingweb.co.uk/c...=784&f=785

Reisclosure

Are you saying that the normal 6 year discovery procedures would not apply if you made the appropriate note on the return ?

Simon

Yes

Re: That 1 year

Thanks for the replies, I'll investigate further and quiz my accountant a little more. I'm maybe getting too old for this game as previously I could just let things drift forever without worrying, so far a successful strategy !

That 1 year

Bradley,

Are you saying that the normal 6 year discovery procedures would not apply if you made the appropriate note on the return ?

Simon

Re: Re:Tax Returns

My accountant said it would involve form filling ( whether gifted or bought from my wife ) that may be a 'come and get me' indicator to the IR.

I presume you are talking about the form for notifying the Inland Revenue of share transfers by employees. The following extract from Inland Revenue web site might be of interest.

"Q1(ee) I have gifted some shares in my company to my wife who is an employee. Is this reportable?
If you gave the shares to your wife because of her employment with the company then this is a reportable event. If, however, the shares were given to her in a personal capacity, unconnected with her employment, then it is not a reportable event."

I therefore conclude that if the transfer of shares from your wife back to you is a personal gift, and not a reward to you as an employee of the company, then you don't have to notify the Revenue.

This is a very new requirement, and I think many accountants are still confused about it. The form was meant to track people getting shares and share-options as part of their employement, but the IR somehow managed to re-interpret it so that every time you start a new company (in which you own the shares) you now have to notify them.

Re:Tax Returns

Just put in the white space on your tax return that although it looks as if you're caught by s660 you've decided not to follow Revenue guidance and have left your spouse's divis off your return.

After one year of the statutory submission date if they haven't opened up an enquiry they can't then do so i.e. you're in the clear - for that year at least.

They're never going to have time to look at everyone's returns so my guess is that quite a few will escape.

Re: You don't need to change.

I think it's form 48 you need to fill in. From the point of view of tax returns - assuming she doesn't gift them to you - you *should* put in in the trust and income page (and I suspect that might be a bit of a flag waver).; However you are almost certainly OK just adding it to your divis. Based on the fact that the IR say words to the effect of "treat trhe income as the settlors".

I really wouldn't worry about raising a flag. If the IR are going to come looking for people they think this applies to then you'll be getting the knock along with everyone else. It is absolutely trivial for them to find you. It'll just be an aspect enquiry to start and then they'll say "ooh about all these divis".

Re: You don't need to change.

You've had this problem before fiddle. When you look at the PCG front page you see an old one.

Yes I think it is a bit tricky to control caching (or rather set a time limit to it) properly. Must be some other not-very avid PCG site readers in the evil empire I guess. A quick refresh shows the current page. As I already know the story I suppose it's not worth reading it anyway though.

Re: You don't need to change.

I have been told its not as simple as gifting them as they have a value ( ie. they've been paying ridiculously good dividends ). My accountant said it would involve form filling ( whether gifted or bought from my wife ) that may be a 'come and get me' indicator to the IR. I am wary of the reporting on my tax return for the same 'come and get me' reasons. He told me this last year but I guess I'll be asking the same questions soonish. My accountant is very by the book compared to others I've dealt with so I'm just canvassing for other opinions. The judgement appears pretty clear cut to me in that if your wife is not fee earning for the Ltd Co then you are caught by S660A.

You don't need to change.

Why get your wifes shares (she can just gift them to you by the way).

All you need to do (assuming you accept that S660A (2) applies in your case) is to report her dividend income on your tax return, not hers.

Re: Re:Sue?

BTW - nice to see that the PCG are still as much use as a chocolate teapot. Current front page...

You've had this problem before fiddle. When you look at the PCG front page you see an old one. When in reality it has been saying "Geoff and Diana Jones of Arctic Systems have lost their landmark Section 660A appeal, which was heard by Mr Justice Park at the High Court in March and supported by PCG." since the result came out a few days ago. Not sure it's fair to blaime the PCG for this.

Re: Re:Sue?

I don't think changing the share structure will avoid any past tax issues but maybe avoid future ones !? Saying that if next years tax return isn't failing to meet 660A ( so isn't picked up in any review of returns ) I am thinking there is less chance I'll get reviewed for the past 6 years. My potential bill isn't too bad at the moment so I'd also like to put a cap on it also. I'm thinking there will be a real issue in the next few months when we have to fill in our personal tax returns ie. do you identify the spouse income or not !?

PCG website had an up to date report yesterday !?