Artic Systems S660A ruling 'must be challenged'

The Professional Contractors Group is calling for public support to fund its appeal against a recent case which has huge implications for tens of thousands of family businesses.

The case, involving Geoff and Diana Jones and their company Arctic Systems, is regarded as a landmark in tax legislation and interpretation.

It now appears that there is a growing body of expert opinion which believes that the ruling which found in favour of the Inland Revenue is in fact invalid.

Anne Redston, tax partner with the leading accountants Ernst & Young, argues that the decision must be challenged: "The Arctic Systems case was deadlocked � of the two Special Commissioners, Judith Powell found for the taxpayer and Dr Nuala Brice for the Revenue. Dr Brice was the presiding Commissioner, and she had a casting vote. She cast this vote for the Revenue, and the case was thus published as a Revenue victory.

"However, we believe this to be incorrect," she said. "The casting vote does not simply give one Commissioner two votes, so that her opinion automatically carries the day. If this were the case, there would never be any point in having two Commissioners, as one could always overrule the other."

Dr Simon Juden, PCG chairman, agrees. "We believe we have a very strong case for appealing against this decision and certainly the view of many accounting and legal experts is that the casting vote should be considered separately from the case itself, and the reasons for the exercise of the casting vote must be given. Dr Brice has given no reasons for her separate exercise of the casting vote. It looks as if she though she simply had twice as many votes as her fellow Commissioner, which we believe is not correct."

The Revenue has been approached, on behalf of the Joneses, to fund the appeal. It has in the past agreed to do this, where the issue affects a large number of taxpayers and is a test case. Despite agreeing that this is a test case, and also having been made aware of the problem with the casting vote, the Revenue has refused to assist the Joneses on the grounds that they do not believe the case to be "of significant interest to taxpayers as a whole."

Dr Juden said, "It's frankly staggering that the Revenue can take this view when it is absolutely clear that the implications of this case for hundreds of thousands of people are enormous. We are calling for public support to help fund the appeal and we are confident that people will support Geoff and Diana."

Anne Redston adds, "I am astonished that the Revenue considers that this case is not of significant interest, and that S660A is not in need of clarification. The use of this obscure legislation against husband and wife businesses may affect hundreds of thousands of taxpayers, and the test case has been taken because most professionals disagree with the Revenue's interpretation of the law."


5th November 2004

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