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June 04, 2006
Tax Laws
Sorry, I simply don’t believe the argument here. This is simply incredible:
GORDON BROWN wants to recoup millions of pounds from celebrities as part of a Treasury drive to reclaim an estimated £97 billion underpaid in tax each year.
HM Revenue & Customs is mounting a test case against Richard Madeley and Judy Finnigan, the chat show hosts, that will set a legal precedent for television presenters, authors and footballers.
It could affect thousands of big names such as J K Rowling, the author, Jamie Oliver, the television chef, and Frank Lampard and Michael Owen, the England footballers, according to tax experts. In total the Revenue is hoping to recover hundreds of millions of pounds.
Legal and financial advisers to the celebrities maintain that they are acting entirely properly and that the Revenue is aggressively reinterpreting established tax laws.
Those potentially affected lashed out at the Revenue yesterday. Margaret Drabble, the author, described its action as “disgraceful”. She gives 10% of all her earnings to Michael Sissons, her agent of 40 years.
I don’t get it. Having an agent is simply a cost of doing this sort of business. How can it not be allowable against tax? It’s a straight commercial transaction: the agent is being paid to be a salesman for the work of the business. Seriously, WTF?
June 4, 2006 in Taxes | Permalink
Comments
Loads of costs of doing business aren't 'allowable against tax', this isn't America.
This bit of the article was strange.
Margaret Drabble, the author, described its action as “disgraceful”. She gives 10% of all her earnings to Michael Sissons, her agent of 40 years.
“I think it’s shocking, I can’t believe it,” she said. “The self-employed are the most vulnerable with regard to tax anyway, so this will be a terrible blow. I cannot exist without my agent, my entire life is run through him.” Jilly Cooper, the author, said: “It seems incredibly mean. Agents are the lifeblood of authors. I don’t know what I’d do without mine, she deserves every penny she gets.”
It began as discussing (as you did) a proposal to not allow payments to agents to be offset against tax, but Drabble and Cooper are apparently discussing a proposal to outlaw the employing of agents, which I've not seen discussed anywhere else.
Posted by: Matthew | Jun 4, 2006 9:28:02 AM
It claims that they have wrongly written off the cost of employing agents against their tax bills and wants to recover a six-figure sum to cover the period back to the late 1990s.
Retrospective reinterpretations of (i.e. changes to) tax laws are the stuff of tinpot regimes like Venezuela and Russia. This is a worrying precedent to set.
Posted by: Tim Newman | Jun 4, 2006 9:59:32 AM
Actually very few costs are disallowed. In every other field of business, paying commission for a service rendered is an allowable expense.
If the Revenue are arguing that the payments are not related to business because of the personal nature of the agents, then they must be gifts, in which case the agents won't have to pay tax on the payments.
Posted by: Kay Tie | Jun 4, 2006 10:06:42 AM
This is so obviously a ridiculous idea.
Someone should file a writ of maladministration against any civil servant trying it on: for wasting the taxpayers' money.
Best regards
Posted by: Nigel Sedgwick | Jun 4, 2006 11:42:44 AM
[Retrospective reinterpretations of (i.e. changes to) tax laws are the stuff of tinpot regimes like Venezuela and Russia]
No they're not; they're absolutely par for the course.
Posted by: dsquared | Jun 4, 2006 1:28:35 PM
"Seriously, WTF?"
Greed and envy; the bedrock of socialism.
RM
Posted by: The Remittance Man | Jun 4, 2006 8:39:22 PM
Oh and I forgot: a complete lack of moral scruples. The end justifies the means, so long as it keeps one in power.
RM
Posted by: The Remittance Man | Jun 4, 2006 8:40:51 PM
No they're not; they're absolutely par for the course.
Care to identify any other changes to tax laws which are applied retrospectively such that people have to stump up for liabilities dating back more than 7 years?
Posted by: Tim Newman | Jun 5, 2006 7:18:04 AM
But not only is this total insanity, it is actual robbery through double taxation of the same money.
Unless of course, dear old Gordo is going to recognise that the money paid to the agent is already taxed and therefore exempt from his return.
Aye right...
Posted by: The Pedant-General | Jun 5, 2006 12:20:59 PM
Tim Newman
"Care to identify any other changes to tax laws which are applied retrospectively such that people have to stump up for liabilities dating back more than 7 years?"
To name just 3: budget 2006 re trust arrangements, IR35, "Arctic" case (the last 2 being "re-interpretations")
Posted by: Umbongo | Jun 5, 2006 1:04:01 PM
[Care to identify any other changes to tax laws which are applied retrospectively such that people have to stump up for liabilities dating back more than 7 years?]
Check any finance bill, there are loads. Every time somebody loses a long-running VAT case they have to stump up years' worth of VAT. Similarly, when the Revenue loses a case, they have to make massive multi-year rebates.
Note, by the way, that this is a case which the Revenue are litigating under existing tax law, not the passing of a new law. If they win it they will have established the principle that agents' commissions have never been deductible expenses, so everyone who has been deducting them has been (innocently) filing incorrect tax returns for a lot longer than seven years and owes the tax.
Posted by: dsquared | Jun 5, 2006 1:46:51 PM
Damn! P-G got in before me.
I was going to be cheeky and ask whether the Literary Agents Association hadn't bunged Gordon a few used fivers in a brown bag to get him to declare agents' fees tax free. Perhaps we should watch to see if the Chairman of the aforementioned association isn't given a peerage in the next honours list.
RM
Posted by: The Remittance Man | Jun 5, 2006 3:28:44 PM
As long as the recipient (the agent) is paying tax then surely it's an allowable expense. If an author employs a solicitor to draw up a contract than that is an allowable expense. How is an agent any different? THis is just yet more grasping socialist bollocks. Let's have a flat tax. That's a tax of 100% of everything we earn. Then Gordon can give us back some pocket money if we've been good boys and girls. How does that sound?
Posted by: Mark S | Jun 5, 2006 4:17:25 PM
Some agents do far more for their clients than could described as necessary to the running of their clients' businesses. They get involved in the personal affairs of their clients, arranging the sort of services that most of us have to pay for out of taxed income. For celebs it is clearly sometimes hard to divorce "business" and "private" (eg what does attending a party constitute?) but I suspect far more gets put down as business expenses as is really true.
Posted by: Bruce | Jun 5, 2006 4:17:52 PM
Bruce,
Lots CEO's have personal staff working for them. It's an accepted fact that these people run around doing private stuff for their bosses.
Are you suggesting that Mr MD of Big Bastard Corp should pay tax on his PA? Remembering that the PA's of government ministers probably perform the same function (though perhaps not as diligently as a certain Miss Temple ever did).
If you start a train of thought you have to follow it through to its logical conclusion, after all. Though, I must admit this government rarely performs that task adequately.
What really puzzles me though is the fact that a high percentage of arty types (the very people who rely on agents) are left leaning. Surely One Eyed Gordon can see that by pissing off authors, playwrights and actors he's going to loose a lot of freinds who, for better or worse, add a celebrity face to NuLabour.
Sounds to me like the looming hole in government finances is closer than we think. And bigger.
RM
Posted by: The Remittance Man | Jun 5, 2006 8:12:12 PM
