Family run businesses worried over the implications of a recent test case involving the section 660a tax clause have been offered advice by the Federation of Small Businesses (FSB).
Husband and wife business team Geoff and Diana Jones of Arctic Systems lost the case against the so-called 'married couples' tax.
The court ordered them to pay £42,000 in back-taxes ruling that Mrs Jones was a 'director' only in name and had assumed the title for tax reasons.
However, the decision was not unanimous and backed by contractors groups, the case is to be taken to the appeal court.
If the appeal is not successful, the ruling will become legally binding which accountants claim would have repercussions for the UK's 200,000 family businesses.
A final decision will not be reached before 31 January 2004, so tax experts at the FSB today warned that many firms will be forced to file their tax returns with the case still undecided.
Simon Sweetman, vice chairman of the FSB's taxation unit, has advised companies unsure about the implications to speak to a professional financial advisor.
He also offered the following advice to businesses filing tax returns:
- Prepare a return in a way that reflects section 660a but add a covering note that you are aware the decision is not final
- Prepare a return without applying the settlements legislation making it clear you have done so. A covering note stating the following should be included: "If the decision in the Jones Garnett case becomes final, then there will be income arising under the settlements legislation"
- Firms who have filed already may want to make a correction to their return by writing to the Inland Revenue with the statement above