Taxing questions at Christmas

An unexpected enquiry arrived in the Tax Advice Network's inbox this week.

“I am becoming increasingly concerned about my potential liability to UK taxes.

I am non-domiciled and non-resident (I think) – certainly no permanent home here – but each December I work temporarily in the UK for a very intensive 24-hour period.

The work is unpaid, but I do receive millions of unsolicited (though habitual) benefits in kind such as glasses of port, mince pies and assorted festive treats. 

I am worried I should have declared these to HMRC. 

Their total value must be substantial, but I have no idea how to measure it. Is there an annual tax liability… and if so, how on earth would I value a mince pie in Aberdeen versus one in Acton?

I’m also getting anxious about Making Tax Digital.

As a sole trader, must I start filing quarterly updates in 2026? I genuinely don’t know whether my turnover exceeds the £50,000 threshold. 

Do I count the notional value of billions of gifts delivered worldwide? And what about barter transactions — a carrot for a reindeer surely isn’t taxable… is it?

If I am subject to tax, I’d like to offset my travel costs and the expense of my vehicle and support team — none of whom are on my payroll. 

Can I also deduct the cost of customer gifts? They’re not food or drink, but they don’t carry my business logo either.

I like to think I’m being nice… but am I actually naughty? Should I seek proper advice or can I safely ignore my self assessment and MTD filing obligations?

The message was signed “S. Claus”.

What is Cross tax?

You'd be forgiven if you've never heard of 'cross tax' although it's been referenced in HMRC's compliance handbook for many years.

Does it mean: 

a) What you get when HMRC staff are overstressed and unhappy? 

b) A big balancing payment that a client wasn't expecting to have to pay? 

c) How clients will describe the additional fees accountants charge for quarterly MTD returns? or 

d) 'Across the taxes’ as opposed to applying to just one area, such as corporation tax? 

The correct answer is (d)

Justifying why NOT to file tax returns

The following are a summary of some of the points argued by a Mr Bell in letters to HMRC and the lower tier Tax Tribunal as to why he considered that he was not required to file tax returns:

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As all humans are created equal, government and the making of legislation requires the consent of the governed

All humans have an absolute right to own property which is gained as a result of their own efforts. Taxation imposed by HMRC is coercive seizure of rightfully held property and cannot be justified.

It is essential that HMRC issue Mr Bell with a statement that they recognise that it is the right of the UK people to govern themselves, and that every individual owns the right to property. Failure to do so demonstrates total absence of bone fide intent on the part of HMRC, in that they are knowingly complicit in Parliament's attempts to strip us of these fundamental rights through the machinery of the law

Liberty is valued second only to life itself

Peaceful resolution of dispute requires submission to reason

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Unsurprisingly these arguments were unsuccessful!

Bell v Her Majesty's Revenue & Customs [2009] UKFTT 270 (TC)

VAT deregistration on death

An older accountant told me what happened to a client after they had died.

The accountant had notified HMRC of the death and deregistered the client from VAT.

Imagine the accountant's surprise to then receive been told nby the client's widow of a follow up letter sent to her deceased husband.

The VAT office letter said: 

"We are sorry to learn of your recent demise. We have processed your request for deregistration but if at any time in the future you become liable to be VAT registered again, you should apply to this office for a new VAT number."

12 ways to have fun completing your tax return

1. Do it while wearing your favourite fancy dress.
2. Every time you claim a deduction, do a victory dance. 
3. Add happy or sad emojis wherever you can on the tax returns 
4. Invent a new tax category for "unavoidable chocolate expenses." 
5. Write a tax-themed haiku for each page you fill out. 
6. Do it naked
7. In "For Office Use Only" area write "Approved. Send refund immediately."
8. Design a tax-themed tattoo for each deduction you claim. 
9. Translate all financial jargon into Shakespearean language. 
10. Attach a ransom note demanding a tax refund for the safe return of your financial sanity. 
11. Insist on using interpretive dance to explain any discrepancies in your return. 
12. Write a heartfelt letter to HMRC, explaining why you believe you should be taxed in chocolate coins instead.

Dodgy advice on how to avoid tax

• Board up your windows so you won't get caught if they reintroduce a windows tax.
• Behave yourself and avoid syntax.
• Make a loss - you only pay tax on profits.
• If you work cash in hand be sure to wash all your wages to avoid catching Coronavirus.
• Stick with Apple devices to avoid the Windows tax.
• Less fasteners, more adhesive.... is a great way to reduce tacks.
• Remove your number plates so the DVLA cameras can’t catch you
• Drink decaf rather than the original Yorkshire beverage to avoid Proper Tea Tax

The tax on fireworks - a true story

60 years ago fireworks were added to the list of goods chargeable with Purchase Tax. Hansard records an odd debate that took place on 12 February 1962 concerning the extent of the charge. 

The new Purchase Tax order paper stated that the Tax (a precursor to VAT) was to be charged at 25% on fireworks of all kinds sold over the retail counter for 5th November celebrations and also those used in firework displays. Previously it was only charged on indoor fireworks which were considered to be "a variety of toy." The mind boggles!

As a result of a question raised in the House, the Government had to make it clear that the tax would not apply to those fireworks that were made for either military or marine purposes. 

Thus there was to be no purchase tax on signal rockets, on "Very lights", on bird scarers used by fruit farmers or on "other commercial articles of that kind".  Seems sensible of course. But tax is never simple. 

There then followed a discussion which included these questions: 

• "If a rocket is fired from a ship for the entertainment of the passengers would Purchase tax be payable or not?" 
• "Are the sparks or stars emitted by a firework, such as a rocket, exploded on Guy Fawkes night for pleasurable purposes different to the sparks and stars emitted from a firework exploded at sea?" 
• "Are 'crackers' fireworks or toys? I am referring to crackers in boxes, containing a mercurial strip pulled at children's parties—not to biscuits". 
• "What percentage Purchase Tax would go on a 'penny banger'?" 

Let's finish this ruby anniversary review with a quote from GR Mitchison (the member for Kettering) who said: 

"This is a silly Order, and a very cheerless one. I can only explain it on the ground that the Government have had so many rockets....that they feel that it is about time a tax was imposed on rockets. There is no other explanation for the Order".

Who came came first? The accountants or the tax inspectors?

An accountant and a tax inspector were having a drink and a chat away from their respective offices.

They started discussing who was part of the more noble profession - accountants or tax inspectors. After a few drinks and various arguments they agreed the most noble profession was whichever had been around the longest.

The accountant, convinced he'd won, quoted the bible. He said:

Even before God created Adam he created an orderly universe from chaos. An orderly universe implies the involvement of accountants to monitor and keep track of developments. By definition some of the angels must have been accountants. There were no taxes, so no tax inspectors around that early in human history.

The tax inspector wasn't beaten. He listened patiently and then simply said: "Who do you think created the chaos?"

David Mitchell's funny explanation of tax avoidance

There are some great quotes in this clip which sees David Mitchell answering questions about tax avoidance during an interview on The Last Leg TV show in 2105.

"Vanilla flavoured. Less than vanilla, unflavoured tax avoidance"

At the other end of the spectrum, "Gary Bartlow's evil flavoured" tax avoidance

Tax avoidance involves "50 shades of grey. And that's not an ice cream flavour anyone wants!"

"Legal loopholes allowing tax avoidance mean the government is “taxing conscience” – the more of a conscience you have, the more you pay – and that isn’t right"

"We're taxing being nice"

Bad language alert in this clip:

Dominic Frisby, 'Let’s Talk about Tax'

I am indebted to Philip Fisher for sharing a review of this 2016 Edinburgh show in Taxation magazine.  Philip's observations include the following about Dominic's show:

• While tax specialists will know much of what is on offer, they should learn some new facts, whether about the history of tax, the size of our code, now over 10 million words - being 12½ times as many as the bible – or ephemera such as the average telephone wait for HMRC, 47 minutes.

• He also makes many intelligent observations, for example that if tax gets too high, people merely avoid it using those time-honoured ‘Fs’: fight, flight and fraud. He observes also that HMRC is technically not answerable to parliament but to the Queen (who is technically exempt from funding herself but pays tax on a voluntary basis)

Other reviewers include additional points of note:

• When he steps onto the stage you can instantly see Frisby’s dressed for money. Suited, booted and topped by a bowler hat, the comedian looks like the quintessential City man. It doesn’t take long to realise the comedian has a compelling interest in cash, and in particular how the government goes about taking ours.

• His knowledge of tax history is encyclopaedic – the UK window tax of the 17th century and its adverse effect on the population’s health and the Roman’s desire to tax urine (which was apparently a valuable agent in clothes laundering and the prevention of tooth decay) just two amusing examples.

Warning: The video interview with Dominic below talking about the show includes sexual references!

Top five worst tax return expense claims

HMRC has published a list of what they describe as the Top five worst tax return expense claims.

These are, apparently, the five most outrageous personal expenses claims included in 2013-14 Self Assessment tax returns.

1. The costs for storing Mars Bars overnight in a fridge.
2. The cost of a pair of flip flops so I don’t have to walk barefoot between my work’s changing and shower rooms.
3. The costs for my intimate waxing. 
4. I bought a second hand car to get me from home to work so I didn’t have to walk. 
5. I purchased my own flat, so I need to claim back the money I spent on the furniture. 

I can't help but wonder how many of these were inspired by reports of claims about the expenses that MPs have claimed in the past!

3 weird US tax deductions

1. In Alabama, you can still deduct $1,000 for building a radioactive fallout shelter.
2. In Arkansas, blind combat veterans may buy a new car every two years tax free.
3. In Hawaii, residents can claim a $3,000 deduction for taking care of "exceptional trees" on their property - as long as an expert deems them "exceptional."

Credit due to: The Atlantic (and thanks to Steve Odem for passing this onto me).

How to value something that can't be sold

I am indebted to that doyen of the UK tax world, Robert Maas who has written about this on his blog. I will simply summarise the issue here.

The case involved the need to impute a market value to a work of art called “Canyon” by Robert Rauschenberg. This is a collage. Unfortunately it incorporates a stuffed bald eagle. It is a criminal offence in America to sell a bald eagle under the Bald and Golden Eagle Protection Act 1940.

The owner didn't sell it but, when she died, the question was what value to place on the collage?

Three separate art appraisers told the executors that “Canyon” is valueless as all that the owner can do with it is gift it to a US art gallery. The IRS disagree. They say, apparently, that the executors should be able to find a reclusive Chinese billionaire who would buy the artwork on the black market and smuggle it out of the USA in order to hide it away. On this basis the IRS value the artwork at $65million. They are also apparently seeking a $11.7million penalty for “gross valuation misstatement” even though the executors accepted the unanimous view of three separate professional valuers that the artwork had a nil value!

Not so much a tax funny as a bizare true story, worth sharing I thought. If you agree do read the full story on Robert's blog.

5 crazy claims for tax deductions from business profits

1 - Cost of hiring an arsonist – NO
A man with a failing furniture business decided to hire someone to burn it down. The store-owner's plan was not only to collect the $500,000 insurance money, but also to deduct the $10,000 expenses of hiring the arsonist! Not a smart man.

2 - Fake Boobs - YES
A stripper going by the name of CHESTY LOVE used her hard-earned savings to boost the size of her boobs, to the eye-popping size of 56-FF. She figured it would get her more tips. And the write-off was allowed, being considered a stage prop essential to her act.

3 - Cat food - YES
Junkyard owners set out bowls of pet food nightly to attract wild cats. The wild cats also took care of their nasty snake and rat problem, making the junkyard safer for customers and providing a useful business service. Yep, you guessed it…the pet food is a business expense, it was allowed.

4 - Body Oil - YES
If you’re a regular Joe, body oil is a once in a blue-moon splurge. Maybe something to spice up an evening with your partner, but certainly not a write-off. However, if you’re a pro bodybuilder and need gallons of body oil to make your muscles glisten, then it is a genuine tax write-off. Just don’t turn up at a client meeting covered in oil, wearing nothing but a thong and a smile.

5 - A ‘Playmate' Party - YES!
The owner of a nightclub promotions firm decided that a regular party wasn’t good enough for his clients. So, he brought in a bunch of scantily clad “bunnies” as decoration. The tax man said sure, it’s a valid expense. Whether or not pictures of the bunnies were attached to the return is unknown at this time.

Taken from a US list of 20 Amazing tax deductions

It's no longer the Big 4. Now there are five!

When I joined the world of tax after qualifying as a chartered accountant in 1982, my 'bible' was the Yellow Tax Handbook. For some time there was just the one volume. (Yes, I know there was an orange one too, but that had stuff in it I rarely needed back then).

By 2001 the Yellow book had expanded to two volumes. In 2007 it was four volumes and now, for the first time it's a five volume colossus.

Couldn't decide whether to post this here or to add some commentary on the TaxBuzz blog. Guess it's only the title that's vaguely amusing really. The ever growing quantity of tax law is no joke! (I commented on this a year ago: Twice as much tax law under Labour as in previous 18 years)

30 years on - What would Rip Van Winkle think?

Professor John Kay presented the Chartered Tax Advisers' Address earlier this week: "30 years of tax policy".

His talk was peppered with references to what Rip Van Winkle might think about key aspects of tax policy, after being absent from the UK tax policy environment for 30 years. He concluded that many of the key issues are much the same today as they were 30 years ago.

At the end of his talk however he generated much laughter from the sizeable audience by observing that:

"The final thing that Rip Van Winkle would do is to pick up the tax code to see if it were any shorter..."

The Sex of a Hippopotamus - History of Taxes and Accounting

I don't very often reference books on this blog. The title of this one intrigued me: The Sex of a Hippopotamus: A Unique History of Taxes and Accounting

Apparently this US published book:

"weaves entertaining and educational stories culled from tax accounting since biblical times. It presents the never-before-told story of how American and world history have been profoundly influenced by taxes. Unique, quirky, interlaced with personal accounts, and always enlightening, these amazing tax stories have involved some of our best- known leaders and celebrities."

The book contains discussions about tax songs and videos, many of which have appeared on this blog. It also includes lesser know tax related stories including:

• gifts to Anna Nicole Smith.
• Liberace's garish "glamour and elegance," and
• Irving Berlin's songs.
• President Franklin Roosevelt made two attempts at taxing income over $25,000 at a whopping 100 percent! And he saved a future president from prison for criminal tax fraud.
• Abolish the IRS? Andrew Jackson actually did. But it came back 28 years later.
• Prior to 1933, U.S. presidents were exempt from income tax.
• Only one U.S. president has ever visited the IRS building.

Oh, and it references accounting and pop culture myths such as the long hours (“in every 24 hours, there are three perfectly good eight-hour chargeable days”),

Past President of CIOT doesn't understand his tax code?

If you were one of the most highly respected and experienced tax advisers in the country you'd probably know something about tax codes. And that's certainly true of Richard Mannion. He's head of the National tax function at accountants Smith & Williamson, a Past President of the CIOT and a recipient of the LexisNexis Taxation Lifetime achievement award.

AccountancyAge is reporting that Richard recently called an HMRC helpline as he'd noticed his tax code was incorrect. Imagine his astonishment to be told that he didn't understand the coding system!

I'm sure Richard stood his ground in his normal polite, gentle but firm way and that his tax code is now correct. But what chance the unrepresented taxpayer?!

Forwarding scam tax refund emails to HMRC

So, what happens when you forward an obvious scam tax refund e-mail to HMRC?

Peter Lashmar received this automated reply:
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Subject: Inappropriate Attachment

The following email message contains an unacceptable attachment and has been blocked.

From: peter@xxxxxxxx
To: phishing@hmrc.gsi.gov.uk
Subject: FW: Recalculation of your fiscal acitivity
Date: 10/20/09
Time: 14:01:23

The Sender should contact the addressee to discuss an alternative method of sending the information.

The blocked message will be deleted after 30 days.
----------------
In other words HMRC's spam blocker blocks the very messages that HMRC is asking people to forward to them. Doh!

If Gordon were King and life were a fairy tale...

One day king Gordon called to the palace his chief tax collector, Dave. ‘I really must have some more taxes’ said the king ‘otherwise I will not have anything to pay my servants (and that includes you, by the way). But I don’t want to annoy my subjects, so what can we do?’

‘We don’t need any new laws’ explained Dave ‘in fact you could just issue a proclamation that from now on we will expect your subjects and especially the bankers to forget the actual wording of the law and instead act in accordance with your Majesty’s intentions when making those laws. No one need bother about the written laws ever again! We could call this concept “the spirit of the law”.’

‘But how do I know what my intentions were?’ exclaimed the king, ‘I just pass the laws you give me.’

‘Sire, I shall be more than happy to tell your Majesty what your Majesty’s intentions were, should the need ever arise’ beamed Dave, bowing lowly.

Adapted from a wonderful fairy tale penned by Trevor Johnson, a senior technical editor with CCH. UK tax advisers and accountants may notice a similarity between the fairy tale and prospective developments in the interpretation of our tax laws.