Section 660

Section 660 of the Income and Corporation Taxes Act 1988, is commonly referred to as 'the married couples business tax'.

Since its introduction people have been issued with tax bills dating back severalyears, causing a great deal of controversy and media attention.

The HMRC claims that under the settlements legislation, dividend income receivedby a non-payrolled spouse or partner should be taxed as the principal Directorsincome.

Basically, income arising for a partner or spouse of someone who operates theirown business is treated as income for the person running the business, not forthe partner or spouse.

This has resulted in substantial tax bills; in some cases, back-dated for over6 years.

The HMRC suggests you could be at risk from Section 660 if:

• Your spouse owns ordinary shares in your company
• You share profits with or pay dividends to any relative, spouse or close partner, who doesn't play an active role in the business
• You pay dividends
• The amount of money you and your spouse bring into the company are not in proportion to the number of shares you own

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