It has been said that we at Accountancy Age tend to put pictures of celebrities on the front page, however tenuously we can link them to the story we're writing about. I'd suggest we only do so as much as the rest of the media, but the point may be fair in some respects.

I only mention it as I think our story about Richard & Judy last week had something more substantive to say. The couple are involved in a tax dispute with HM Revenue & Customs, which I understand may be on a point of general principle of interest to other taxpayers. We don't know what it is yet sadly, as nobody is telling us. The Mirror had a few more details on Monday, and anyone who wants to post anonymously below is very welcome, of course!

Celebrities are not infrequently involved in tax disputes. With the help of John Whiting, I've come up with a few other well-known celebrities who've gone head to head with the tax authorities.

Peter Shilton is one. Shilton won a case in the late 1980s over ehwther or not a payoff by Nottingham Forest as part of his transfer to Southampton was taxable. It wasn't because Forest had no interest in the performance of his new contract at Southampton, it was held. (N.B.- Shilton then lost in the Lords - see above)

David Frost, the broadcaster, had a dispute in the 1970s on earnings from US screenings of the David Frost Show.

There have been discussions for many years also about whether or not testimonial earnings for footballers and cricketers and others might be taxable. I can't find details of any case, though there was a row over testimonials for Alex Ferguson a few years ago.

John says Bobby Moore was involved in a case over a World Cup bonus too, which he won. If our footballers win this year, will they also be challenged on bonus earnings by the revenue, I wonder? I wouldn't be surprised.

He mentioned Sir Laurence Olivier too, and a payment made for not making various films.

He thinks there are a reasonable number of such cases. 'You are talking useful money [with these people]. There's also some quite interesting principles at stake.'

Others disagree. Julian Hedley of Tenon, who handled Andre Agassi's recent case over sponsorship income, says those in the public eye are very reluctant to court attention on their finances. 'They are very reluctant. They don't want the publicity. Nor do they want all their financial affairs laid bare in front of the world.'

I can understand that. Anyone with more details on the tax cases mentioned above, or with ideas of other public figures who've contested points with the revenue (rather than been pursued for tax fraud, for instance), feel free to post them below. Making sure it's not libellous, of course...

May 31, 2006 | Permalink | Comments (1)

Further to my earlier post about filing deadlines and Taxation magazine, the latest plan is to get everyone to write to their MPs to get them to sign an early day motion on the subject.

The EDM has been signed by representatives of the three major parties, and Taxation's editor Mike Truman is set to urge readers next week to write to MPs to garner their support too. The magazine already has a list of almost 4,000 people pledging their opposition to the move to bring filing deadlines back.

Taxation has also set up a blog here.

The move to change the deadlines has been opposed by a huge number of advisers, from those at the top of the profession to the grass roots. There are some people who think the change will be manageable, though mainly, it has to be said, those with an interest in the technology requirements the move will provoke.

If nothing else, it has to be said, HMRC will face a huge burden in pushing it through, since such a large number of people have said they will only file estimates by the deadline and true figures when the liaiblities are due.

Some compromise must be on the agenda, mustn't it?

May 26, 2006 | Permalink | Comments (0)

No doubt Kenneth McFarlane, the Deloitte tax partner, thought there was an important point to be litigated in contesting the divorce settlement with his wife Julia. The case was certainly interesting and sets a new precedent in terms of the valuation of a wife's contribution to a marriage. But did he really want to have all his financial details discussed in the media?

The House of Lords decision said that the £250,000 he would have to pay his wife was a third of his salary. That was a net figure, it should be pointed out. His total income in 2002-2003 was almost £1.3m.

But probably most troubling was something not discussed in the House of Lords judgment but in the Court of Appeal. It emerged then that several of the McFarlane's properties had been bought through 'partnership loans'. The Clerkenwell flat he bought in 2001was financed by a 'tax efficient partnership loan' according to the court.

The documents then say: 'The husband [then] formed a relationship with one of his partners and in August 2002 they purchased in the ratio of their respective financial contributions a house in Barnes for £2.94m inclusive of costs. The husband sold his flat in Clerkenwell and his new partner sold her flat. Again the purchase was largely financed by a substantial mortgage and by tax-efficient partnership loans.'

Aside from the minor embarrassment of discussing who he was dating, what are these partnership loans and how widespread are they? The BBC Money programme piece into tax avoidance, 'No tax please, we're rich!' commented on McFarlane's loan, saying the loan was a perk that partners in accountancy firms could use, presumably by using (or rather, abusing) the tax relief available to join the partnership. Deloitte was reported as saying such moves were 'commonplace'

If all that's true, it's a fairly appalling and unsavoury sort of scheme. Mcfarlane and co are, after all, rich people, and don't need the extra tax relief to buy a house. What's more, I understand HM Revenue & Customs are not all that bothered by such set-ups, which is surprising.

The district judge had commented: 'The taxation concessions available to the husband in obtaining partnership loans to finance the purchase of property are very generous.'

Far more generous than they are to the rest of us, and far more generous than they should be, one might add.

May 26, 2006 | Permalink | Comments (0)

One other interesting thing Geoff Lloyd said, and this may be a trend noted by those dealing with the taxman before (to whom I apologise for boring them), was his reference to HMRC's 'customers', i.e. taxpayers, and HMRC's 'products', i.e. taxes.

The suggestion that taxes might be just products opens up an interesting thought. Is it a case of 'Hmm, I don't think I'll buy this product, I'll have that one'? If so, can we have sale times, when the products go cheap?

If I was given the choice, I have to say I think I'd opt for VAT rather than any other tax - you don't notice it so much as a direct tax.

Or perhaps through a good tax adviser I can opt for not buying any of HMRC's products at all? Does the taxman have a view on that, I wonder?

The taxman was particularly indignant about the idea recently that M&S might 'shop around' the EU for tax reliefs in the group relief case. Clearly the consumer lingo only takes it so far.

May 22, 2006 | Permalink | Comments (0)

Geoff Lloyd's comments on tax avoidance this week at a LexisNexis Tolley conference on the subject are worthy of a wide audience.

Lloyd, director of HMRC's central compliance directorate, announced that HMRC was looking to 'leverage the benefits to advisers of reducing risk for their clients,' i.e. rewarding those who steer clear of tax avoidance.

The idea of rewarding advisers looks a neat idea consistent with HMRC's aim to make avoidance 'not worthwhile', but it looks to be a legal minefield. How can you have as a matter of policy a punishment/reward system for advisers doing things which are perfectly legal, but which you happen to dislike?

He also said that botched avoidance schemes would be treated as negligence, a point that may sting big business, according to some. According to others, the only people they will catch that way are negligent advisers who are most likely already without reputation or credibility.

Lloyd also made some other interesting remarks about avoidance in general.

He admitted, for instance, that there was no single definition of tax avoidance. 'There is no single HMRC definition,' he said.

Avoidance is not paying the right tax at the right time. How can we know what the right tax is then? 'HMRC responds to the intentions of legislation,' he said.

The badges of avoidance include, in particular, the notion of artificiality, he argued, and said HMRC was looking closely in particular at avoidance related to leasing and intangibles.

You have been warned.

May 18, 2006 | Permalink | Comments (1)

Talking of the John Prescott tax issue, there's another interesting letter in Taxation magazine this week raising an amusing problem.

'There has been much press coverage recenlty on the clothes and cosmetic treatments of prominent politicians and their wives during the last general election campaign,' someone known only as Jealous Guy, writes.

If his employer pays for a suit for him to wear, he is taxable as a benefit in kind, he says. Are our leaders, not to mention Cherie, treated in the same way? Or is he just missing out on some tax relief?

One can only hope our esteemed politicians' tax arrangements are all in order on this one.

May 15, 2006 | Permalink | Comments (0)

You couldn't exactly say it's the biggest problem the government is facing, but the row over John Prescott's tax arrangements does pose a serious threat to the government's authority.

The Telegraph reports today that John Prescott is facing questions from advisers, Mike Warburton of Grant Thornton and John Whiting of PwC being those quoted, saying that he should pay tax on the use of grace and favour homes he lives in.

Broadly speaking, the tax rules say that you are taxable on such properties unless they are crucial for work in various respects. Prescott's use of the houses when he doesn't do the job any longer poses serious questions as to whether he is, or should be, paying tax on them.

It will not be long before MPs are involved in asking precisely what is going on. The Cabinet Office says all rules have been followed and that such houses are necessary for security and so on. Advisers says their clients have been hounded for more convincing reasons than those publicly advanced.

There is, in this respect, apparently one loophole that applies. Chevening, the Kent retreat for all foreign secretaries past and present, is exempt according to an act of parliament, apparently. Though it seems unlikely, the government could introduce an act to extend that exemption.

There is a broader point too. This is a government which has pushed hard on tax issues, avoidance and proper corporate behaviour.

Getting around tax rules is unacceptable and unfair to the majority of taxpayers who pay their fair share. A phrase, I should add, that is not my own but, (apart from the first four paraphrased words), those of Dawn Primarolo, the paymaster general.

May 8, 2006 | Permalink | Comments (1)

There's a line in the Special Commissioners' verdict on the Barclays disclosures which is truly quite shocking. HMRC has got its hands on more bank accounts as a result of the move than there are people who fill in the foreign income section of the tax return.

In assessing whether or not to grant the order, Special Commissioner John Avery Jones said: ' It is worth pointing out that the number of customers of the Financial Institution to which the Notices relate exceeds the total number of persons in the UK who have completed the foreign income pages in their returns.  Far from being a fishing expedition it seems probable that some 76% of cases will raise questions, in many of which there will be an innocent explanation, but in others there is likely to be default in complying with tax obligations.  The Inspector’s estimate is that 20% of cases will result in an additional yield of about £1,508m.  In the light of these statistics I am satisfied that the class of taxpayers specified is a proper one.'

You can read the verdict here.

This, to recap, is one bank. Hundreds of thousands of accounts are set to be scrutinised. Obviously we have to be a little bit careful about how many of those will be evasion, and how many neglect, but it is worth pondering.

Are we a nation of tax evaders? And when HMRC's investigations are complete, will there be anyone left not in jail?

May 3, 2006 | Permalink | Comments (0)