Arctic Systems: desperately seeking bounty

Article by Keith M Gordon, barrister, chartered accountant and tax adviser. This article appeared in the June 2005 issue of Tax Adviser.
Background facts

The salient facts of this case are well known and were set out in my article ‘Scrutiny of the Bounty’ which appeared in the November 2004 issue of Tax Adviser. However, for new readers, it is appropriate to state that the case concerns a family company, the shares in which were owned equally by a husband and wife (Mr and Mrs Jones). The income of the company was generated by Mr Jones – Mrs Jones providing administrative support from their home. Mr Jones took a salary well below the market rate giving rise to significant profits in the company which were distributed to its shareholders as dividends. The question for the court was whether the dividends received by Mrs Jones should, for income tax purposes, be assessable on Mr Jones under the ‘settlements’ provisions formerly in the Income and Corporation Taxes Act 1988.
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June 2005 by Keith M Gordon