Husband & wife companies

Common sense seems to have prevailed at last in respect of husband and wife owned businesses. The common situation involves a personal service company (e.g. IT contractor) owned jointly by a husband and wife. The husband is the fee earner but takes a low salary to enable dividends to be paid to both the husband and wife. Joint ownership can often reduce the overall tax burden of the business. Previous to this case HMRC would seek to tax the husband on the wife’s dividends as well as his own. However, in Jones v Garnett, the tax payer won which now makes HMRC’s argument difficult to sustain.

The only question that remains is will HMRC appeal?