The Federation of Small Business has attacked HM Revenue & Customs' decision to petition the House of Lords over a small business tax ruling that went against them.
The case centres on Arctic Systems - a small business run by husband and wife Geoff and Diana Jones in West Sussex. Using a highly complex area of trust law, the Revenue has argued that dividends paid to Mrs Jones should be taxed as if they had been paid to her husband.
Just before Christmas the Court of Appeal ruled in favour of the Joneses - saying the pair were entitled to use a capital structure recognised and actively encouraged by the Department of Trade and Industry.
But just before the appeal deadline, HMRC has taken the case to the House of Lords. The FSB said the move has added months of uncertainty for small businesses across the UK.
Simon Sweetman, FSB tax spokesman, said: "HMRC's hard line attitude to a family-run business in this case is very worrying and doesn't instil confidence in the UK small business sector, which rightly expects to be treated proportionately and fairly by the tax authorities.
"We are disappointed that HMRC refused to respect the decision of the Court of Appeal, which delivered a decisive and authoritative ruling."