Section 660

S660 rules (or settlements rule) that the Inland Revenue are using have been in place for many years. However in the last couple of years the Revenue have started using them in a way which had never before been considered as being under the remit of S660.

The original rules stop you passing income to someone else in the family, or giving income or assets to someone else on the basis that you will have it back later, all in an effort to reduce your overall income tax bill.

However a number of limited companies have in the past been set up with Husband and spouse (Partner etc) as co directors, each holding equal shares in the company
They would both work for the company in different capacities drawing equal income and claiming their personal tax allowances. Furthermore dividends would be equally distributed on any profits the company made.

The revenue more recently argue that in many situations one party does not work or that the workload is vastly biased. Therefore that one party is in fact drawing a salary in order to take advantage of personal allowances and reduce the tax burden on the other party.

This new use of section 660 has resulted in the revenue bringing a number of test cases in which they have sought backdated tax. These cases are all disputed and at
Appeal stage with the special commissioners.