Tax from the Trenches: “Horse-trading with the big-guns”

Horse-trading

I sat very contented on the sofa last Saturday. My other half had spared me the agony of going clothes shopping with her and I had the house to myself. I went to the naughty cupboard and found a family size bag of Walkers sensations and started skipping through the SKY channels looking for something to watch. In the end, and I’m not ashamed to admit it, I settled on a good old fashioned British Rom-Com that I’d seen before, some 15 years ago when it first came out, and had enjoyed it unashamedly.
So you may be asking how this can possibly link into a tax article? Well one of the stars of the film, whose name I cannot mention of course, was the subject of some HMRC interest back in the day when I was an investigation compliance manager. Her tax return had been flagged because we believed, wrongly as it turned out, that there were some additional receipts relating to royalties and a book advance that had not found their way onto her tax return. We didn’t feel it warranted a full enquiry as the fault could well lay with her accountant at the time, who was something of a family friend and quite inept at his job. The opening letter was issued and within a week we received a letter from one of the “Big-Four” firms notifying of their intention to take over her tax affairs and the enquiry.
A few weeks later we received a very full and complete response to our queries, fully befitting an accountancy firm of that stature, and allaying most of our concerns. I think deep down, the Inspector working the case, and myself, had hoped that a meeting might be necessary with the very well known actress, but it now looked like this wasn’t to be. The new agents continued, however, that having reviewed their client’s affairs in some detail, they had identified some £20,000 of additional expenses that should be claimed against her self-employed profits. In their opinion all the costs were fully vouched and allowable and they would be more than happy for us to visit their offices to inspect everything. I don’t think for a minute they expected a couple of Inspector’s from a provincial district in the wilds of Essex to make the journey into London to look at a pile of invoices. But they had seriously misjudged our appetite for having a day out of the office and perhaps a pub lunch in the heart of town. A few weeks later me and the Inspector working the case set off on the overground from Romford station like two carefree schoolboys.
We were met at the very grand accountancy offices by a very senior partner who had something of the Gregory Peck about him, and a lady manager who was an 80% fit for Rosa Klebb (James Bond Villain with the stampy-shoe knife thing if you remember that?). We were whisked through the offices to a very grand conference room with several folders of invoices for us to look at. Gregory and Rosa followed us in and Gregory made small talk whilst dropping all manner of names from the entertainment industry. Eventually they left us on our own to start looking through the invoices, but not before someone had brought in an impressive tray of sandwiches and assorted grapes for us to munch on while going about our business. I could sense my colleague, who we’ll call Tim as he’s still an Inspector with HMRC, about to say that we couldn’t possibly accept their hospitality, but I’d already set my sights on a monster of a prawn sandwich so I cut him short. “We shouldn’t really” I said, “But as you’ve gone to all this effort it would be rude to refuse. Perhaps you might like to join us for a sandwich later”. “I would” said Gregory as he went to leave the room “But I’m having lunch with Dani Minogue today”.
Within ten minutes we were bored. We’d looked at all manner of invoices including clothes, designer dresses and shoes, makeup, handbags and goodness knows what else. It was clearly a try-on. The HMRC penalty regime was a lot different back then and the plan had clearly been to claim for absolutely everything and then try and negotiate a percentage. There seemed little point in reviewing any more invoices so we settled on tucking into the sandwiches. I can’t remember what Tim said to start the affray but it was funny and I had spluttered a bit of my sandwich out trying to stifle a laugh. I’m not sure what possessed me but I picked up a grape from my plate and gently threw it at him. He looked away at the crucial moment, didn’t see it coming, and it bounced squarely off his nose. We both laughed and he threw it back at me, and we watched as it landed in a jug of water over my right shoulder, splashing a few drops on the antique mahogany table at the side. I got up and picked the grape out the jug and, for reasons I still don’t understand, spun around and launched the grape at Tim with something of a baseball throw, just as Rosa Kleb appeared in the doorway.
I was very lost for words and could feel the deepest of blushes coming on as Rosa stared intently at me, and then Tim. I could see Tim’s shoulders reverberating as he tried not to laugh and he stuffed a huge beef sandwich into his mouth to stifle his giggles. Unfortunately it just had the effect of giving him immediate hickups. The atmosphere was electric and I could see small tears of laughter trailing down Tim’s face as stared at his plate trying to will his hickups to stop.
The rest of lunch was a taut affair with little in the way of small-talk. After what seemed like an eternity, Gregory joined us to ask if we were happy with the receipts. “Not really” I replied, manging to gather myself together. “You’ve claimed for absolutely everything she’s spent in the year. Possibly a few expenses might relate to her role as an actress, but not many. I’ll allow 5% because the prawn sandwiches were very nice”. I smiled at him with my best “You weren’t expecting that were you” look on my face. Gregory gave me a pained smile and looked at Rosa. Rosa smiled at me, “I thought the grapes looked a bit bruised”. She left her comment hanging in the air like a bad smell. Tim stifled a giggle, a few seconds passed, then I saw it, the crease lines in her cheeks followed by a genuine chuckle. Rosa had a sense of humour! and I warmed to her as she said “Our client is in the media spotlight all of the time, her image is her brand and her image is everything from her clothes to her hair and makeup. Let’s say 75%”. I smiled back. “Your client spends money like it’s going out of fashion, she’s always being photographed when she goes shopping and I don’t think she should be getting tax relief for everything she buys. Incidentally there are some invoices for underwear and lingerie, I’m guessing she wears undies in everyday life or are you saying they’re needed for specific acting roles? Let’s say 10%.”
The horse-trading continued for another minute or so and we eventually agreed on something around the 15% mark from memory. When I think of how hard it is these days to try and horse-trade a deal, because HMRC Inspectors have so many forms to fill in and everything needs to be approved, I think back to the good old days of horse-trading where life just seemed so much easier. Rosa and Gregory thanked us for coming along as we were shown out of the building and we were still able to get to the Pub for 5pm. Quite a day.
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