Advisers have warned the government not to make any 'knee-jerk' reactions to losing the Arctic Systems tax case, including altering legislation to plug the 'husband and wife' decision by the House of Lords.

The Lords today ruled that Geoff and Diana Jones of Arctic Systems had entered into a tax arrangement, but it fell into an exemption for a 'gift' between husband and wife.

Advisers welcomed the decision, which could have adversely affected thousands of husband and wife businesses, but warned that the government could still look to halt the exemption in the future.

'The concern now is that HMRC might tinker with the legislation to plug the gap,' said Melissa Healy, solicitor at law firm Macfarlanes. 'They might be worried that advisers will see this as a green light for husband-and-wife or civil partners’ businesses to avoid National Insurance contributions and higher rates of tax.’

Francesca Lagerberg, chair of the ICAEW tax faculty Technical Committee, said the result was a vindication of the way many owner-managed business were operated, but called on the government to provide tax policy that was clear and supportive of business.