Section 660A

Section 660 is also called the "married couples business tax." The term has caused a great deal of controversy and media attention in recent months as people have been caught with tax-bills dating back several years.

It has been suggested that half a million family businesses in the UK may face the tax. For decades businesses have reduced their tax bills by transferring profits, normally in the form of dividends, from earner to partner who is in the lower tax zone. Many people have received letters asking them to pay back money owed from years ago. The Inland Revenue have hit many different companies, not only service companies. The Times recently reported that TV stars and celebrities could be caught.

There are over 3.5 million 'small business' in the UK . It is suggested that around 70 per cent of UK businesses are run by people related either by blood or marriage.

It is a difficult issue for taxpayers as they have no way to calculate whether they are liable under 660, or how large that bill could be. As a rough estimation you could be at risk from Section 660 if:

• Your spouse owns ordinary shares in your company.
• Share profits with / pay dividends to any relatives, spouses or close partners who doesn't play an active role in the business.
• You pay dividends
• The amounts of money you and your spouse bring in to the company are not in proportion to the number of shares you own.

For many, the risk and uncertainty of Section 660 on top of IR35 and other regulatory issues is the final straw with some people choosing to close down businesses.