the Business Forum and
the Economic Partnership
in Brighton & Hove
Homepage    BCRP Intranet    Funding    Events    Knowledgebase    Links    About us     Contact us
Key projects
Crime
reduction
 


Inward
investment
information
 


Licensee
Forum
 

Workforce development 

Transport
 

Business &
climate
change

Property &
Development sites

Business
Improvement
Districts

Housing
 

Strategy
 

Consultation opportunities
 

Brighton & Hove Business Forum
8-11 Pavilion Buildings, Brighton, BN1 1EE
Tel: 01273 735442
Email: info@brighton
business.co.uk

© Brighton & Hove
Business Forum

News - 28 April 2005

Arctic Systems decision chills SMEs

The decision by the High Court to back the Inland Revenue over dividend payments to husband and wife owners of small businesses might mean a radical re-think about how couples remunerate themselves.

Many couples receive part or all of their remuneration by awarding themselves dividends as shareholders. Dividends are not subject to National Insurance. If they are equal shareholders the dividends will be the same amount even though one partner may do more work than the other. If one partner is a low or non earner, their tax free allowance can be offset against the dividend and what tax they do pay will be at the lower rate of personal income tax.

The Inland Revenue’s argument, accepted by the special commissioners in the High Court, is that this amounts to an ‘arrangement’ under the 1988 Taxes Act and consequently the dividend for the low or non earning partner should be taxed at the same rate as the higher earner.

In the case of Arctic systems it was suggested that the husband in the partnership had accepted a salary well below his true earning power and this effectively swung the case in the Revenue’s favour. Mr Jones paid himself £7,000 in salary and his wife took £4,000. The rest of their remuneration was made up by splitting a £60,000 dividend equally.

If a partnership using the dividend arrangement can show that they both put in equal time and effort into the business they should not fall foul of this ruling but it will be incumbent on them to prove it not the Revenue to prove the reverse. It may well be a good idea for owners to start clocking in and clocking out or at least keeping a record of hours devoted to the business.


Read related items on:
Legal and financial services
Taxation
Legislation
Arctic Systems


Browse our business Knowledgebase or search by keyword


Headlines

23 February 2018
Brighton Technology Company, Paxton Ranks in Sunday Times 100 Best Companies to Work For
23 February 2018
Greater Brighton's Commercial Property Database 22 February 2018
SE-ASSIST - Launch of Loan Capital in Greater Brighton 19 February 2018
House Price update Q4 2017 19 February 2018
What would you do in a crisis? 19 February 2018
The investment journey for high growth entrepreneurs 9 February 2018
Make Change Count 2018 - helping rough sleepers in Brighton & Hove 8 February 2018
Brighton Technology Company Paxton Announces Recipients of New Scholarship Programmein Association with the University of Brighton 8 February 2018
Cyber London Accelerator Invites Summer 2018 Entries 8 February 2018
Innovate UK Launches Strand 2 Emerging and Enabling Technologies Sector Competition 8 February 2018
Success In Sussex As Food And Drink Heroes Crowned Winners 8 February 2018
UK Games Fund - Fourth Round Open to Applications 8 February 2018
Innovate UK & Prince's Trust Launch Young Innovators' Programme 6 February 2018
Brighton & Hove Food Partnership launches 'Kit Out The Kitchen' crowdfunding campaign 2 February 2018
Brighton & Hove Council and Crest Nicholson win £15m government funding to kickstart King Alfred project 1 February 2018
Could a Utilise Plus Programme grant help you? 1 February 2018
Shoreham Port Facilitates Huge Operation 18 January 2018
IUK Announces Collaborative R&D Funding for Connected and Autonomous Vehicles Simulation 18 January 2018
Renault-Nissan-Mitsubishi Launches $1 Billion Corporate Venture Capital Fund for Next Generation Mobility 17 January 2018
PORTlife #17 Newsletter Out Now 17 January 2018
Over £19,000 raised for Burning the Clocks 2017 11 January 2018
Brighton Main Line Improvement Project: Planned closures in October 2018 and February 2019 11 January 2018
Come on in! Fairtrade Fortnight 2018 8 January 2018
Sussex Business SkillSnap targets hospitality industry skill shortage 3 January 2018
House Price update 2017 Q3 20 December 2017
£14.35 Million European Regional Development Fund Launched 19 December 2017
Leading the way - Sustainability in Action masterclass 15 December 2017
Brighton is among the best places to start a business due to their strong growth factors 15 December 2017
GTR consultation ends 20th Dec 2017 13 December 2017
Ethical Food StartUp Programme - Idea Generation Workshop 12 December 2017
Utilise Plus launch programme of energy efficiency grants and business support for SMEs 11 December 2017
City Centre Vacancy Rates Drop Slightly From Sept 5 December 2017
Innovate UK Announces Sector Competitions in Manufacturing and Infrastructure Systems 5 December 2017
GDPR, steps to early compliance 1 December 2017
The 29th Sussex Business Awards 2017 Winners Announced 1 December 2017
Old tech gear? Give IT a new lease of life 29 November 2017
Driving for Better Business Campaign launches 29 November 2017
ARKA Funerals sponsor Burning the Clocks 2017 with 'In Memory' lanterns 27 November 2017
Govia Thameslink launches third consultation phase on once-in-a-generation timetable restructure 23 November 2017
Coast to Capital Launches Brighton Mainline Alliance