Thousands of husband and wife companies face possible higher tax bills after HM Revenue and Customs (HMRC) announced it is to appeal a landmark court ruling in favour of IT firm Arctic Systems.
HMRC revealed late on Friday it will seek leave from the House of Lords to appeal the Court of Appeal's decision which backed the financial arrangements employed by Arctic Systems proprietors Geoff and Diana Jones.
Under the arrangement, the Joneses paid themselves low salaries and took £60,000 of the remaining profits as dividends in order to qualify for lower tax rates.
But HMRC believes the procedure to be a tax dodge and has pursued the couple in the courts since 2001 seeking to claim back thousands of pounds.
Should HMRC win an appeal, many husband and wife-run companies across the UK could be faced with paying back all the money previously saved in tax and National Insurance through bills of up to £9,000.
The Professional Contractors Group (PCG), which supported Geoff and Diana Jones' case, said the decision to appeal will "exacerbate and prolong the uncertainty" around how couples may file their business’ taxes, particularly as the deadline for completing self-assessment tax returns is just two weeks away.
"We are profoundly disappointed that HMRC has chosen to expose hundreds of thousands of businesses to yet more uncertainty, especially with regard to their self-assessment positions, rather than accept the common sense verdict delivered in this case," said PCG chairman Simon Juden.
Tax experts urged those concerned about how to complete their tax returns to file as per usual until the case is resolved.