|
Parasol PAYE umbrella company
Over 32,000 satisfied contractors. Get paid quicker. Call 0800 5836000. |
Section 660 - Overview of the tax legislation
Posted Feb 17, 2006
The Section 660 rule, has been UK legislation since the 1990's. Its primary aim was to prevent people passing across assets and income to family members in an effort to reduce their tax liabilities, whilst intending to reclaim those assets at a later date. However, this rule was not, until recently, applied to company dividend payments.
Now known by many as the 'married couples business tax', the Revenue have recently begun to claim that the Section 660 rules can be applied to dividend income received. In other words, where a limited company director has his non-fee earning spouse as a joint-shareholder, any dividends she receives from the company should be taxed as her husband's income. Although this tax is being fought vigorously by several pressure groups, some people have received tax demands amounting to tens of thousands of pounds, backdated several years.
HMRC are believed to have targeted personal service companies (particularly 'one man band' contractor and freelancer companies). You may be targeted for Section 660 payments if any of the following apply;
- You pay dividends to family members who are not actively involved in the running of the company
- The amount of income you and your spouse bring into the company are not in proportion to the number of shares issued to each person.
Section 660 Defeat
HMRC suffered a series of legal defeats in the famous Arctic Systems saga, including a final defeat in the House of Lords in 2007, in which it failed to demonstrate that the 'Section 660' rules should apply to family businesses.
The birth (and delay) of 'income shifting' rules
Not soon after the Arctic Systems defeat, HMRC swiftly announced its intention to clamp down on 'income shifting' - whereby business owners may split their income in order to reduce their joint tax burden.
Plans to implement the new income shifting measures have been delayed - firstly in Budget 2008, and then indefinitely in the November 2008 Pre-budget report.
Contractor Services
- Clarity - Chartered Accountants - Fixed Fee £95/month. No hidden extras.
- Together we're stronger! - Join PCG, representing contractors
- Professional Indemnity Insurance - Essential contractor PI cover
- AccountsNet CA - PCG Accredited. Great Value @ £65pm - View Demo
- inniAccounts - Online Accountants, 24x7 Access, Free Demo
- Qdos - IR35 experts - Providers of low cost contractor insurance
- Free Umbrella Company - Save over £1400 p.a. on fees with Springboard
- Free IR35 & Tax Review - Call ICS on 0800 195 3750
- K & B Accountancy Group - Fixed fee contractor accounting only £75pm
- Parasol - the UK's favourite umbrella company
- planIT Services - Umbrella, Ltd company, free formation & IR35 review
- Cloud 9 Group - Umbrella Solutions only £9.95 per week
- Key Directories: Contractor Accountants | Umbrella Companies
- Financial Services: Income Protection | Contractor Mortgages | Pensions
- More Services: Compare Business Insurance | Company Formation
Related Articles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
