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| Couple claim victory in tax case | Couple claim victory in tax case |
| (40 minutes later) | |
| A husband-and-wife business has won a landmark tax case against HM Revenue & Customs (HMRC) in the House of Lords. | |
| Geoff Jones and his wife Diana successfully fought an HMRC ruling that they avoided tax by paying Diana through dividends from their firm. | |
| Victory for HMRC could have seen retrospective tax bills being levied on tens of thousands of family firms. | Victory for HMRC could have seen retrospective tax bills being levied on tens of thousands of family firms. |
| The government has said it will now bring forward plans for changes to tax laws to ensure "fairness". | |
| "The Government is committed to maintaining fairness in the tax system," a Treasury spokesman said. | |
| "This case has brought to light the need for the Government to ensure that there is greater clarity in the law regarding the tax treatment of 'income-splitting' arrangements which are used by some taxpayers to achieve an unfair advantage over others," he added. | |
| The Federation of Small Businesses and accountancy groups welcomed the ruling. | The Federation of Small Businesses and accountancy groups welcomed the ruling. |
| "Clarity had been brought to this issue and it means small businesses will now be able to run their affairs without fear of being classed as tax avoiders," Chas Roy-Chowdury, head of taxation at the Association of Certified Chartered Accountants (ACCA) told BBC News. | "Clarity had been brought to this issue and it means small businesses will now be able to run their affairs without fear of being classed as tax avoiders," Chas Roy-Chowdury, head of taxation at the Association of Certified Chartered Accountants (ACCA) told BBC News. |
| Re-interpreted | Re-interpreted |
| The case relating to the Jones's IT consultancy firm Arctic Systems first started in 2003. | The case relating to the Jones's IT consultancy firm Arctic Systems first started in 2003. |
| It arose when HMRC decided to re-interpret the well-established law on how joint and family-owned businesses should be taxed. | It arose when HMRC decided to re-interpret the well-established law on how joint and family-owned businesses should be taxed. |
| It is very possible that the government will introduce legislation to close this loophole in a future budget Emily Campbell, Wilberforce Chambers | It is very possible that the government will introduce legislation to close this loophole in a future budget Emily Campbell, Wilberforce Chambers |
| The authorities decided that where a low-earning or non-earning spouse, who is a co-owner of the business, received dividends from their company, that money should be taxed at their partner's income tax rate. | The authorities decided that where a low-earning or non-earning spouse, who is a co-owner of the business, received dividends from their company, that money should be taxed at their partner's income tax rate. |
| They argued that Mr Jones had reduced his own salary to an artificially low level, so that he could effectively give his wife a bigger slice of his own earnings, but paid as dividends. | They argued that Mr Jones had reduced his own salary to an artificially low level, so that he could effectively give his wife a bigger slice of his own earnings, but paid as dividends. |
| The Joneses faced a tax bill of about £50,000. | The Joneses faced a tax bill of about £50,000. |
| The couple - from Pulborough in West Sussex - won their argument in the Court of Appeal in December 2005 but the HMRC appealed to the House of Lords. | The couple - from Pulborough in West Sussex - won their argument in the Court of Appeal in December 2005 but the HMRC appealed to the House of Lords. |
| The House of Lords ruling effectively ends the case, which started in 2003. | |