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”.

An accountant's shocking Christmas confession

Seen on a website for anonymous confessions: 

 

"I’m an accountant. Every Christmas our office has a secret vote for the client who has been the biggest pain in the backside. We then report the winner to HMRC regardless of whether we have any concerns about their tax affairs. Invariably they get a full audit so we get more work. It’s win win".

7 Christmas Cracker jokes for accountants

 What's the biggest overhead in Santa's accounts? 

- Private Elf care 

What’s an accountant’s favourite Christmas carol?
- Debit bells, debit bells, debits all the way!

Why does Santa pay so little tax? 

- He claims Gift Relief (Gift Aid would've been funnier) 

What is the employment tax status of Santa’s helpers? 

- Elf-employed

Why are accountants terrible at Christmas charades?
They insist on doing a full disclosure before acting anything out.

How does Santa’s accountant value his sleigh? 

- Net Present Value. 

Why did Santa get in trouble with the tax man?

- He missed the deadline on his elf-assessment.

A tax themed Christmas Carol

We nick ye merry gentlemen and confiscate your sleigh

For using it to bootleg booze and ciggies from Calais

To you we're wise, you've dodged excise,

We've tailed you all the way.

You're go-o- ing to pris-i-on old boy!

Oh what a joy!

You're go-o-ing to Wormwood Scrubs old boy!

Written by Chris Williams of Baker Tilly (as it was back then) and first published in Taxation magazine 20 December 2007

Is Santa a tax avoider?

Santa's VAT adviser, who wishes to remain anonymous, says she has been pondering some key issues:

 First things first, is Santa a taxable person? 

He is only active once a year (though it is a busy night and he visits a lot of countries!). 

Also his activity is carried out very regularly every year (he never misses). 

But is he carrying out an economic activity? 

Is he giving the presents away or are the mince pies and brandy left out for him (and the carrots for the reindeer) non monetary consideration (not to mention the requirement that the children have to have been good – which is surely priceless). 

 Is the letter to Santa a contract and what happens if one party (the child) fails to meet its part of the bargain (the aforementioned ‘being good’ bit). 

If the gifts left for each child in a household cost less than £50 and there is no consideration provided, can Santa claim the input tax on these without there being an output tax liability? 

 How should he value the work of the elves in the workshop that produce the gifts – and are they his employees or are they self-employed? 

There is no doubt a range of other issues to consider as regards Santa’s direct tax affairs and how he can afford to carry on year after year with no money coming in (unless you count the fees for all those shopping centre stints – but is that really him??). 

 Is Santa’s sleigh an airplane used by an airline operating for reward chiefly on international routes? 

Can the reindeer food be zero rated because the reindeer are working animals? 

He is supplying delivered wrapped goods, which all start their journey at the North Pole, (non EU) and don’t go through Customs, so what is the place of supply, and is he making a single supply or is the wrapping separate? 

 If it is separate how do you apportion the non monetary consideration (assuming there is any)? 

 Lots to think about! 

 [A version of this letter has appeared elsewhere beforehand but I cannot trace the original]

'Last Christmas' as sung by a tax inspector

Last Christmas, I sent a demand

But the very next day, you appealed it away 

This year, to get us some tax 

I'll investigate and ensure you pay 

 (Chorus) 

Once bitten and twice shy 

I want your records, but you just seem to lie 

Tell me, taxpayer, do you recognize 

The mess you've made with your financial lies?  

Last Christmas, I filed a report 

But the very next day, you sent it away 

This year, to save me from tears 

I'll start a COP9 and make you obey  

Crowded offices, filled with paperwork 

Hidden incomes, we'll make it work 

I'll trace the money, follow the trail 

Your tax games won't let you prevail 

Last Christmas, you thought you were slick 

But the very next day, I uncovered the trick 

This year, to save me from strife 

I'll ensure you pay your fair share in life  

Some credit is due to ChatGPT for this. 

The 12 taxing days of Christmas

A few years ago  Emily Coltman of FreeAgent analysed the tax consequences of every one of the gifts mentioned in the classic song “The Twelve Days of Christmas”.

Emily imagined that the minstrel, whose "true love" gave all these gifts, needs help completing a tax return. 

What, imagined Emily, would be the income tax and VAT rules applicable to the gifts that make up the famous festive menagerie?

What follows is just a sample from some of the explanations. In each case Emily provides rather more detail than is appropriate for this fun blog ;-) 

A partridge in a pear tree This is what HMRC call a “mixed supply” for VAT, because it’s goods with different VAT rates supplied together. The pear tree is zero-rated for VAT, while the partridge, as an ornamental bird, would be standard-rated.  

Three French hens When goods of any kind are brought in from the EU and bought by a business that’s registered for UK VAT, the business has to work out and account for the VAT they would have paid if the item had been bought in the UK. 

Five gold rings If you’re buying an antique gold ring or other piece of second-hand jewellery, how would the seller work out VAT?

Six geese a-laying HMRC goes into a serious level of detail on this. The basic rule of thumb is that poultry kept for their meat or their eggs would be zero-rated for VAT, whereas ornamental birds would be standard-rated.

Eight maids a-milking Milkmaids need to live on the farm in order to be able to do their work properly; in order to do the morning milking they have to get up very early, and so it wouldn’t be practical or possible for them to commute. That means that the farmer can provide the milkmaids with living accommodation free of tax and National Insurance. 

Nine drummers drumming A drummer would have to buy his or her costume to perform in.  That might be a kilt, jacket and plaid for a drummer in a pipe band, or a suit for a jazz band drummer, and so on. He or she can then claim tax relief on the cost of that costume, because a costume for a performer is tax-deductible. 

Twelve lords a-leaping What would be the tax implications if these lords a-leapt out of the country? It depends why they’re a-leaping out and for how long.

Rudolph and the Revenue

Rudolph the red-nosed reindeer 

Hated paying NIC 

Went to a sharp adviser 

Paid the man a hefty fee 

He told the other reindeer 

You should do the same as me 

Go and see my adviser 

Get yourself a PSC 

Then one foggy Christmas eve

the taxman came to say: 

"Your idea was not so bright 

You owe tax, you're banged to rights" 

So all the deer were bankrupt 

Didn't have a bean they said 

Now taxman's after Santa 

He'll be really in the red. 

 Written by Chris Williams and first published in Taxation magazine 20 December 2007

If Santa was an accountant.....

 If Santa was an accountant...

• ...he would report true and fair (naughty and nice)
• ...he would collect receipts for subsistence from the secret 'other' Santas who service other countries
• ...all of the kids clothes would be from "Baby GAAP"
• ...his helpers would work in a small room cranking out toys during 'present season' which gets longer every year.
• ...letters to Santa would be carried forward from prior year
• ...he'd probably moan about all the red tape he has to deal with
• ...his family still wouldn't have a clue what he does at work
• ...he would think about the mileage deduction for his reindeer drawn sleigh
• ...you'd only have to be 'materially' good to get 'substantially all' of your gifts
• ...most of the insignificant things on your wish list would be disregarded and "noted for next year"
• ...he would give you review comments on your christmas list
• ...he wouldn't get paid overtime but his elves would
• ...it wouldn't be called a gift list, it would be a request list and listed in order of importance.
• ...he'd have to follow those Hobby Loss Rules. Not much profit in the Santa business :-)
• ...he'd divide the world's children into assets and liabilities
• ... there would be 4 big Santas

This is a selection of the suggestions volunteered by users of twitter in response to an invitation to use the hashtag: #ifsantawasanaccountant

Santa's tax satus

 A few year's back. Taxation magazine published this enquiry from a reader:

On a visit to the UK last year I picked up a copy of your magazine and wonder if readers can advise me. I am non-domiciled and non-resident (I think) in the UK – no permanent home here – but each year I work temporarily in the UK for a short period.

The work is unpaid, but I do receive benefits in kind; glasses of port, mince pies and the like. I am rather concerned that I have not declared these to HMRC in the past. Should I have done so and is there an annual tax liability to be paid on these gifts or benefits? And if there is, how is the tax calculated under self assessment?

The chosen pseudonym is "S. Claus".   

I wonder what advice one would give him for 2023?

The 12 days of Christmas or Taxmas (a reworked xmas carol)

 First line: On the first day of Taxmas the taxman sent to me:

- A rejection of my time to pay plea

The second verse:

On the second day of Taxmas, the taxman sent to me
- Two demand notes and
- A rejection of my time to pay plea

...and so on.
The last verse is:

On the twelfth day of Taxmas, the taxman sent to me
Twelve months to pay my debt
Eleven penalty charges
Ten confusing statements of account
Nine booklets on 'How to complain'
Eight explanatory leaflets
Seven website links
Six excuses for the delay
Five more queries
Four VAT returns to file
Three blank tax returns
Two demand notes and

One reluctant acceptance of my time to pay plea.

When I had the idea for this I checked online and found there was an old US version of the 12 days of Taxmas. Mine was developed independently.

Merry gentlemen - Reworked carol as sung by HMRC

We nick ye merry gentlemen and confiscate your sleigh
For using it to bootleg booze and ciggies from Calais
To you we're wise, you've dodged excise,
We've tailed you all the way.
You're go-o-ing to pris-i-on old boy!
Oh what a joy!
You're go-o-ing to Wormwood Scrubs old boy!

Written by Chris Williams of Baker Tilly and first published in Taxation magazine 20 December 2007

A tax themed xmas carol

We nick ye merry gentlemen and confiscate your sleigh

For using it to bootleg booze and ciggies from Calais

To you we're wise, you've dodged excise,

We've tailed you all the way.

You're go-o- ing to pris-i-on old boy!

Oh what a joy!

You're go-o-ing to Wormwood Scrubs old boy!

Written by Chris Williams of Baker Tilly (as it was back then) and first published in Taxation magazine 20 December 2007

Heather's 12 days of accountingmas

This wonderful final verse of Heather Smith's take on the 12 days of Christmas includes some lovely gentle ribbing of accounting speakers and conferences. 

Claus vs HMRC

A while back Taxation magazine published a spoof judgment of a first tier tax tribunal case imagined by Robert Maas.

I have taken the liberty of extracting some of the key elements from the reported judgment:

In this case HMRC were represented by Mr Scrooge. 

The taxpayer did not appear and was not represented. Mr Scrooge explained to me that Mr Claus is reputedly very eccentric. He expects people to communicate with him by writing their message on a piece of paper, folding it and inserting it up a chimney. HMRC did this.

Mr Scrooge told me that HMRC’s letter certainly was not returned undelivered. I accordingly accept that Mr Claus was duly served with notice of this hearing and I decided to proceed with the case in his absence. HMRC told me that Mr Claus has some sort of facility overseas which either manufactures toys or stores toys procured from elsewhere (I am not clear which).

Mr Claus is known to visit the UK regularly and to distribute the aforementioned toys to children. For some reason that HMRC have been unable to explain to me, he apparently comes to the UK only once a year, always during the night of 24 December, and is seemingly unwilling to speak to HMRC or anyone else during normal business hours.

HMRC claim that Mr Claus is carrying on a business. He has imported a very large number of toys in the course of that business and has supplied them in the UK. The value of the toys far exceeded the VAT registration limit for each year, which means that Mr Claus should have registered for VAT and accounted for VAT to HMRC.

HMRC are seeking the VAT due for the 20 years to 25 December 2011 on the value of the toys supplied in this country, either as VAT due on import or VAT due on making taxable supplies here.

I asked Mr Scrooge why HMRC believe that Mr Claus is carrying on a business, as I was under the impression that he distributes his toys by way of gift. It is fundamental to VAT that the supplies must be made for a consideration.

Mr Scrooge explained that HMRC hold information to suggest that Mr Claus does not give toys to naughty children. Accordingly the toys are not distributed as gifts; they are supplied as consideration for a child having been good.

Mr Scrooge drew my attention to the tests summarised by Mr Justice Gibson in CCE v Lord Fisher [1981] STC 238 as to when activities constitute a business, namely: Whether the activity is a serious undertaking earnestly pursued: it clearly is so, as Mr Claus is reputed to employ a vast number of elves as “little helpers”.

A further point that concerns me in relation to the claim for VAT on importation is the EU concept of proportionality. Apparently Mr Claus delivers the toys in a sleigh powered by eight reindeer. However these are not ordinary reindeer. They appear to have magical powers, as they propel the sleigh in such a way that, however heavily it is loaded, it remains erect with the runners on a level with the hooves of the reindeer, so that it is not necessary for the vehicle to set down anywhere in the UK. It enters from the stratosphere and hovers above the country’s rooftops.

This may sound somewhat incredible, but HMRC have not questioned the practicality of this mode of delivery, so I assume it to be accepted as correct. The commissioners have promulgated a method for dealing with VAT on importation where goods come into the UK through a recognised border, but it is not apparent, at least to me, how a taxpayer is expected to account for VAT where his delivery vehicle comes from above and hovers over a rooftop while Mr Claus descends down the chimney below.

It may be that the Commissioners have made it exceptionally difficult, if not virtually impractical, for Mr Claus to account for import VAT. I am sceptical whether it can be proportionate to expect him to account for VAT in the absence of any machinery to enable him to do so. so. IHowever, the concept of proportionality is usually raised in the context of taxpayer’s rights; it is unclear to me whether it applies also to his obligations.

In passing, I would also say that I cannot see how HMRC will collect their tax. Mr Claus has no assets here and HMRC have been unable to determine precisely the location of Fairyland, or wherever else it is that Mr Claus comes from. The UK has clearly not entered into a treaty with Fairyland for the mutual enforcement of tax debts. I also cannot see how HMRC will be able to calculate the value of the taxable supplies.

Thankfully that is not my problem though. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

What do you get an accountant for Christmas?

Cassons Christmas song - Holding out for an Accountant hero

This is a great video from accountancy firm Cassons with specially adapted lyrics and, one presumes, featuring staff and partners in a variety of roles and guises.

Tax is for life, not just for Christmas

I do enjoy the ramblings of tax sage Murphy Richards who blogs for the Justice For Taxes Network.

Surprisingly I have not seen fit to reference any of his pieces here before. But this extract from a recent post about an upcoming lecture seems worth sharing:

"The theme of my lecture is that, rather like a dog, people commonly associate Christmas with taxation. It is probably because Christmas is a time for giving rather than receiving. Which is something that The State loves to hear from its citizens. 

But my deliberately provocative point is that we should also think about taxation the rest of the year too. 

As with a dog, being responsible for taxation requires year-long care. It involves administering worming tablets, vaccinations, sticking a microchip in the neck and carrying plastic bags in your pocket at all times. It means going out in the cold for long walks in the pouring rain, sometimes shouting its name, giving up and finding it waiting on the doorstep for you wagging its tail. 

Sometimes taxation will steal your roast dinner from the kitchen work surface whilst your back is turned and you will have to have a cup-a-soup instead.  

The only difference I can think of is that we shouldn’t have taxation put down when it becomes too burdensome to look after. And we shouldn’t leave it in kennels in the UK when we go abroad. You should get a pet passport for your UK tax liability and take it with you wherever you go. 

It is another one of my powerful metaphors that makes the point readily understandable and accessible to all."

Taxation Board game for Christmas

Taxation magazine has produced a Taxation Board game to help bored accountants and tax advisers involve their families in their technical world over the festive season. Or maybe it's something to play in the office before you leave for Christmas.

As Richard Curtis who devised the game says, rather optimistically:

Who knows, this could be the first of a great Christmas tradition - the annual Taxation board game. Watch out for 'Taxopoly', 'Trivial Pursuit - the Tax Edition' and 'Taxudo' (the Inspector, in the office with Tolley's Orange Tax Handbook 2008-09).

To play the game just follow the guidance provided on the Taxation website:

First, snaffle the dice from that old Monopoly set under the stairs.
Next you need some playing pieces: we have provided some cut outs of famous tax faces at the foot of the game for you to use. They're downloadable along with the playing board. Download them by clicking the PDF link at the foot of this article.
You can choose (no fighting now) which of this year’s tax personalities you would like to be: Alistair Darling (Chancellor of the Exchequer), George Osborne (Shadow Chancellor), Vince Cable (the Liberal Democrats’ economic spokesperson), Dave Hartnett (HMRC’s Permanent Secretary for Tax), David Taxable (Tax Personality 2008) or Rufus (The Dog).
Alternatively, there’s always the boot from that Monopoly set.
If you really have a burning desire to be, say, Stephen Timms, Angela Eagle or Kitty Ussher – or even (for the sake of auld lang syne?) Dawn Primarolo, then you will have to track down some photos and using sticky-back tape make your own piece.

A little dated but new to me anyway

Definition of an Accountant....A walking, talking calculator

Definition of a very expensive calculator… anything that moves at any of the big four firms of accountants

Enron, WorldCom and Parma lat… The Accounting Profession's version of the old adage 'waiting ages for a bus and 3 turn up at once'

Little Girl (pre nursery) to her Mummy after hearing about the Enron, WorldCom and Parmalat shenanigans…Mummy, Mummy, I wanna be an accountant... hush, hush little one, go over there and play with your calculator

Same little girl to her mummy…. Mummy if I play with my calculator will I become an accountant …with plenty of practice you might do

What's the 1st entry on every accountant's birthday/Christmas prezzie wish list…? A new calculator

The same little girl to her mummy… Mummy, mummy…I've had plenty of practice on my calculator… can I work for PWC… Little one, you'll have to wait a few years, I'm not sure if they are hiring straight from pre nursery… I'll tell you what though, I'll get your father to draw up a professional looking certificate saying that you're a qualified calculator user, I'll send that off to PWC… and we'll see what they say