Taxman issues ‘confusing’ Arctic Systems guidance

Geoff and Diana Jones

The taxman has issued ‘confusing’ guidance on husband and wife tax rules
following the Arctic Systems case, according to advisers.

HM Revenue & Customs today issued
settlements tax legislation
in light of losing its battle against
Geoff and Diana Jones of Arctic Systems.

But advisers were expecting HMRC to reveal a consultation document in which
the taxman would effectively reverse the decision reached on Arctic, as had been
promised by the Treasury.

Instead, HMRC’s guidance is interim, taking into account the Lords’ ruling
but not outlining how it will reverse that decision – which is still expected.

Anne Redston, visiting professor at Kings College London, said while it was
important for HMRC to update its guidance after losing the case, people would be
confused about the contents of the latest document.

‘This guidance is confusing, when we were expecting a consultation doc, it
would have at least been helpful of HMRC to say “this isn’t what you’re
expecting”,’ said Redston.

The Arctic Systems tax battle revolved around how the husband and wife
business split their incomes and dividends to place themselves in an
advantageous tax position.

In October’s pre-Budget report the
government said it would ‘shortly’ issue guidance on reversing the effect of the
House of Lords’ Arctic Systems judgment.

Further reading:

Arctic Systems: timeline and
background on the case

claims advisers supported HMRC over Arctic

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