Today (15/12/05) the tax payers won the Arctic Systems case in the Court of Appeal. The 3 judges decided unanimously that there could not be a settlement with an element of gift from Mr Jones to his wife where they entered into commercial arrangements not designed at the outset to transfer income. 

James Ferguson, tax partner at Deloitte, comments:
“The victory will be hailed as an early Christmas present not just for the taxpayers in this instance, but for husband and wife businesses throughout the country who should be able to rely on the judgement when completing their 2004-05 self assessment Tax Returns, due by 31 January 2006. Taxpayers relying on the judgement are recommended to state as such in their returns.

“Unfortunately this is unlikely to be the end of the story.  The Revenue have previously intimated their intention to pursue their argument through to the House of Lords should that be required.  Accordingly absolute certainty will not be achieved until either the Revenue decides not to appeal after all or the House of Lords settle the matter once and for all.

“One of the key concerns voiced by business relating to this case has been the lack of clarity and certainty for taxpayers, which is supported by comments made in the judgment. Anti-avoidance provisions relating to settlements should have no real place in the taxation of small businesses.  We believe that the Revenue should be encouraged to formulate simpler and clearer rules for taxing these companies, and to apply them on a consistent basis over time.”

Ends

Notes to editors

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.