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Section 660A is part of the Income and Corporation taxes Act 1988 and is also known as the “settlements legislation”. It is applied as part of the shake-up on tax and personal service companies and particularly affects ‘husband and wife personal companies’.

Section 660A refers to income arising for the partner or spouse of somebody who runs their own business. That income is treated as income for the person running the business and not for the partner or spouse. Often it is the husband who is doing all the work and earning the money but instead of being taxed fully, the spouse's allowances are used to cut the tax bill.

Section 660A, also applies to any company owned by close family members where the objective of shareholdings is tax avoidance and it affects many family businesses. If any family member holds more than 5% equity everyone becomes subject to S660A.

Contracts which fall within IR35 and where all income is paid as salary are not affected. The legislation only applies to income allocations to non fee earners which would not be possible within an IR35 contract.

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