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Taxman loses appeal to IT contractors

The taxman has lost a House of Lords appeal that could have forced IT contractors to pay more tax from businesses they had set up with their spouses.

The taxman has lost a House of Lords appeal that could have forced IT contractors to pay more tax from businesses they had set up with their spouses.

The Professional Contractors Group (PCG) had backed a case being fought by Geoff and Diana Jones of Arctic Systems Ltd against HMRC.

With PCG's backing, the Joneses have spent the past three years battling the Revenue's efforts to reinterpret a law retrospectively and mount a tax raid on companies that are jointly owned by one revenue-earning partner and one non-earning partner, the PGC said.

Geoff Jones said, "Diana and I are delighted that the Law Lords have vindicated our position, and confirmed that we have done nothing wrong.

"This has been a terrible ordeal for us, which looked like it could cost us our home at one point. We are relieved it is all over, but I am still extremely angry that the government tried to pull this stunt in the first place."

PCG chairman David Ramsden said, "This is an enormous relief for family businesses throughout the UK, who had been facing a tax rise from a previously obscure bit of law.

"We will now be working to ensure that HMRC respects this decision and does not attempt to penalise family businesses unfairly."

If the Joneses had lost, HMRC would have been able to demand tens of thousands of extra pounds in tax from their joint business, going back six years.

HMRC would have then gone after thousands of other IT contractor firms set up in the same way.

More details on the case >>

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Contractors risk losing IR35 benefits as compliance deadline looms >>

MP slams slow payment of tax credit ITcompensation >>


Comment on this article: computer.weekly@rbi.co.uk

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