Small businesses can thank the House of Lords for guidance on how to organise their tax affairs, following a decision in the case of Arctic Systems.The Jones vs Garnett (Arctic Systems) case concerns the tax treatment of a husband-and-wife-owned company, with HM Reve-nue & Customs (HMRC) believing that unacceptable arrangements had been made in order to reduce the overall tax liability of the husband and wife concerned.The company, equally owned by Geoff and Diana Jones, had a turnover of £91,000 for one particular year, derived from Mr Jones’ activities. He drew a salary of £7,000, while his wife drew a salary for administrative work of £4,000, for which she worked about four hours per week. After expenses and corporation tax, the couple shared the remaining £60,000 equally in dividends. As a consequence, the pair paid less tax and national insurance contributions on their income, because they took dividends rather than salaries, and a significant portion went to Mrs Jones to use up her lower tax rates.HMRC’s technical argument was that Mr Jones’s actions in setting up the company, allowing his wife to subscribe for an ordinary share, and the general arrangements all constituted a ’settlement’. Under anti-avoidance rules, the income of a settlement can be treated as that of the settler in some cases. As far as husband and wife (or civil partners) are concerned, the settlement rules don’t operate unless the property given is “wholly or substantially a right to income”.Tax assessmentHMRC assessed Mr Jones on six years’ worth of dividends paid to his wife by Arctic Systems, producing a tax bill of about £42,000 once interest had been added. What was at issue was the amount paid to Mr Jones: HMRC would have been happy if he had been paid a substantial salary by the company, leaving just a small profit to be paid out as dividends to the co-owners.One point worth noting is that companies with significant assets wouldn’t be caught by this new approach. That’s because when the shares in the company were allocated, even if the husband was making a settlement, it wouldn’t be just a gift of income but would involve the assets owned by the company as well.There were three issues with the HMRC stance:? that an ordinary share doesn’t just give a right to income? how can taxpayers accurately assess the right amount of income?? this was a change of stance from HMRC, challenging a long-standing arrangement.The Jones’ first appeal produced a finding in favour of HMRC and this was upheld at the High Court. However, the Court of Appeal found for the Joneses.The House of Lords has upheld the Court of Appeal, saying there was a settlement, but agreeing that it wasn’t just about income. The arrangement fell into the exception in the settlement rules.One of HMRC’s contentions was that it has regularly taken similar cases and settled with taxpayers. Those taxpayers may well be due a repayment and should be talking to their tax advisers.However, the government has already announced that it will change the law to reverse the House of Lords’ decision. Exactly how and when (probably next April) remains to be seen, but husband-and-wife businesses will have to keep their taxes under review. nJohn Whiting is a member of the Chartered Institute of Taxation
As 35 counties in North Florida are in a state of emergency preparing for Hurricane Michael, the Florida Democratic Party is asking Governor Scott to extend voter registration past the original October 9th deadline.In the request to Governor Scott, FDP Chair Terrie Rizzo wrote that “The impending hurricane will adversely impact the ability of eligible, but unregistered, individuals who may have waited until the last day to register to vote. These individuals may forego registering, in view of your warnings regarding the danger of the storm, the need to prepare, and anticipated and existing evacuation orders.“While 11 Counties have already issued evacuation orders, it is expected that even more local governments in the area of the emergency declaration will consider closing offices and issuing evacuation orders on Tuesday in anticipation of the hurricane’s landfall, also affecting the ability of these individuals to register.”Meanwhile Florida’s Secretary of State Ken Detzner has issued the following statement: The Florida Department of State is committed to ensuring that all eligible Floridians are able to register to vote, including those Floridians who may be impacted by Hurricane Michael, which is forecasted to make landfall as a category 3 storm on Florida’s Gulf Coast. We encourage all Floridians to use the Department’s secure, fast, and easy online voter registration website: RegisterToVoteFlorida.gov. The website is mobile-friendly and available 24 hours a day, seven days a week. The Department’s efforts to launch voter registration online have been successful with more than 40,000 people utilizing this new tool to register to vote or update their voter registration online during the past week. Florida law requires the voter registration books to be closed on the 29th day before each election. For the For the 2018 General Election, the deadline is Tuesday, October 9, 2018. At the same time, thirty-five Florida counties are currently under a declared state of emergency due to the approach of Hurricane Michael.In my capacity as the Chief Elections Officer of the State of Florida and pursuant to my authority in section 97.012(16), Florida Statutes (2018), and as directed by Governor Rick Scott, I hereby issue this directive regarding the book closing deadline established by section 97.055, Florida Statutes.Registration applications can be collected after Oct 9Any Supervisor of Elections whose office is closed on Tuesday, October 9, 2018, the book closing deadline, as a result of Hurricane Michael is authorized to accept paper voter registration applications for the 2018 General Election on the next day that his or her office is reopened. This will ensure that each Supervisor of Elections Office has the same amount of days to register voters at their offices.On line applications must be by midnight Oct. 9The deadline to submit an online voter registration application will not change and will remain at 11:59 p.m., October 9, 2018. Please notify the Division of Elections if your offices will be closed on October 9, 2018, due to Hurricane Michael and the date your office reopens following the storm. This will allow Department staff to process voter registration applications consistent with this directive.