Contractor specialist accountants Danbro have welcomed the news that Geoff and Diana Jones have won their case against HM Revenue and Customs.

The House of Lords has given the all clear to the tax arrangement used by Geoff and Diana Jones in their company Arctic Systems, which has been the subject of an investigation since 2003. The couple drew a proportion of their income through share dividends which are not as highly taxed as salaries. IT consultant Geoff Jones won his case at the Court of Appeal in 2005 but since then HM Revenue and Customs had continued to challenge the ruling.

Damian Broughton of Danbro comments: “This case been going on for four years, during which time IT contractors and family run businesses across the UK have been in a period of constant uncertainly over whether their tax affairs are in order.

“The landmark ruling this week is great news for Geoff and Diana. All five Law Lords rejected HMRC's case on the basis that, although there was a "settlement" for the purposes of S660, it fell within the exemption provided for an outright gift between spouses. The settlements legislation therefore does not apply to companies jointly owned by married couples and civil partners and structured in this way.”

Geoff and Diana Jones were suddenly hit with a £42,000 tax bill when HMRC had stated that owners of SMEs, like Mr Jones, were deliberately paying themselves a low salary so that profits could be passed on to another family member who held shares in the company. The couple were defended throughout by the professional Contractor’s Group.

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