TaxCorporate TaxHMRC could pay Arctic refunds

HMRC could pay Arctic refunds

Several hundred small businesses could claim back tax as a result of the Arctic Systems decision, as HMRC ponders taking case to the House of Lords

HM Revenue & Customs may have to refund several hundred small businesses
on the back of the Arctic Systems decision.

The Court of Appeal decision delivered last month rejected the government’s
use of settlements legislation to attack a corporate structure commonly favoured
by small businesses.

The structure, through the payments of dividends and salaries and use of
allowances, allowed many husband-and-wife businesses to mitigate their tax
bills.

HMRC had also used the rules it applied to Arctic Systems’ case to other
businesses, which now could be liable for refunds.

Simon Juden, chairman of the Professional Contractors Group, said he
understood there to have been about 50 to a 100 such cases every year for the
last few years.

HMRC has yet to indicate whether it accepts the Appeal Court judgment. A
decision on whether to petition to appeal is due this week.

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