Posted: 02 December 2004
Issue: Vol 154, Issue 3986

Settlements guidance

The various tax professional bodies, including the ICAEW's Tax Faculty and the Chartered Institute of Taxation have expressed disappointment at the new Inland Revenue guidance on the settlements legislation (TA 1988, s 660A, published on 18 November). This legislation particularly affects small husband and wife businesses and was the subject of a recent Special Commissioners' decision in Jones v Garnett.

They say that the guidance 'consists almost entirely of repackaged earlier comments and does not address the key areas of uncertainty' which the professional bodies have repeatedly highlighted.

The tax representative bodies have therefore issued joint guidance to their members on how to cope with this complex area. The advice includes a recommendation that taxpayers who are potentially affected by the new rules protect themselves against the possibility of a future attack on their business structure by the Revenue. Such taxpayers should submit detailed information with their tax returns, including:

* copies of the partnership or company accounts and computations;

* a copy of the memorandum and articles of association of the company, or partnership agreement in the case of a partnership; and

* a summary of how the business operates, and, in particular, what is done by each of the shareholders or partners in running the business.

The professional bodies' guidance is on their respective websites, including www.tax.org.uk and www.icaew.co.uk/taxfac.

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