The UK government has signalled its intent to overhaul tax rules - in order to help prevent VAT fraud.

A common fraud problem is when goods are imported VAT-free into the UK, and VAT is charged on the sale to UK customers - but then the company disappears, pocketing the VAT for themselves.

The scale of the fraud is believed to be so serious as to skew trade figures for the treasury.

This is especially where different companies all in the scame trade between themselves - known as “Carousel” fraud.

This can have an especially bad impact on original businesses trying to reclaim VAT rebates, only to find it frozen because of HM Customs and Excise being unable to account for it.

A small business has won a landmark court ruling over how much tax they pay.

According to the BBC, the case hinged around the paying of dividends to a spouse who was the partner in the business:

The company had a turnover of £91,000 for the year in dispute, derived from Mr Jones’s activities.

He drew a salary of £7,000 and his wife drew a salary of £4,000 for administrative work.

After expenses and corporation tax the couple shared the remaining £60,000 in dividends.

They paid less tax and national insurance because they took dividends rather than bigger salaries and a greater portion went to Mrs Jones to use up her lower tax rates.

HM Revenues and Customs had claimed that because the wife was only an administrative assistant in the business, she was not entitled to a larger share of the dividends for tax avoidance purposes:

HMRC ruled that income from company dividends, received by a non-earning or low-earning spouse who is co-owner of the business, should be taxed at the same rate as the main earner’s income.

Despite an earlier ruling in favour of the tax man, the final judgement came today from the Court of Appeal - small business could split dividends between partners to cut their tax bill.