A DARTFORD-based accountancy firm is warning husband and wife business owners to beware of a new Inland Revenue crackdown.

John Robinson of Finsbury Robinson says national press reports have caused some family-run businesses to panic they may receive huge tax bills under a tax law called section 660a.

Mr Robinson says the legislation is even baffling some tax experts.

"Basically, the section is aimed at companies where there is one revenue earner, with a spouse or family member as an employee, and/or shareholder. If you are running a family business where each shareholder is an active part of the business then there is nothing to worry about," explained Mr Robinson.

"The targets tend to be cases where there is one revenue earner and a spouse or family member, who does not have a significantly active role in the business, but receives a large dividend."

Mr Robinson said a case where one small business was asked to pay £42,000 prompted the Chartered Institute of Taxation to demand that the Inland Revenue clarifies the legislation.

The Revenue issued a statement saying: "The settlement legislation is intended to prevent an individual from gaining a tax advantage by making the arrangements which divert his or her income to another person liable to a lower rate of tax".

Mr Robinson says many of the one million family businesses in the UK are structured in such a way that the effect of this legislation could be "overwhelming".

He said: "Some businesses may be branded as tax avoiders and have large bills to pay. Many have been unaware that the Inland Revenue was going to take this position, and it has come as a nasty surprise to some."

But he says there is light at the end of the tunnel, as many professionals believe the Revenue's approach is legally flawed, unprecedented, and will be seen as an unfair new tax on small businesses.

"The tax investigation insurers Qdos are preparing cases regarding section 660a, and will challenge the Inland Revenue's attack on family businesses," he said.

Mr Robinson advises any business owners who fear they may be affected to carry on as normal, but keep in regular contact with their accountant for any updates.