News - Dec 2005 - Dividends

Family company dividends Hot off the press is the news that the appeal affecting the taxation of dividends received by husbands and wives has been found in favour of the taxpayers in the Court of Appeal.

Many of you will be aware and will have read in the national press, the case of Arctic Systems where the Revenue contended that dividends received by Mrs Jones are taxable on Mr Jones as he undertook the work which earned the funds from which the company paid the dividends.  The Special Commissioner and the High Court agreed with the Inland Revenue but the Court of Appeal, thankfully, has not.  In the same way the decisions against the taxpayer were not a cause for over reaction, neither is the victory announced today.  I suspect the case may well proceed to the House of Lords. 

The news is very new and I have not yet read the decision in full but the case affects very many clients and therefore some seasonal glad tidings.  

VAT on mileage Many of you will claim mileage expenses from your companies.  It was always the case that VAT on the petrol element could be reclaimed.  Our peers in Europe did not like and threatened the withdrawal of this allowance.  The situation has recently been clarified by the UK government who confirm it is acceptable to carry on although with the provision now that you have to retain petrol receipts up to the value of the amount on which VAT is reclaimed.  More paper to keep although please be warned of this new requirement as it contradicts the advice I have given over the years (and which, for the avoidance of doubt, was correct at the time) that receipts were not required.