Lindi St Clair's tax
problems started when she refused a discount to a cross- dressing
tax inspector.
By then, as a result
of police raids, she already had two convictions for brothel-
keeping. During the second raid all the girls escaped out of the
back door leaving the Vice Squad to discover Lindi sitting quietly
in the lounge,with a vicar in a gas mask handcuffed to a wall, a
straitjacketed member of the House of Lords shut up in a cupboard
and an MP chained up to a dog kennel in the garden. On both
occasions the police had urged her to plead guilty, pay the fines
and look on it as just like paying tax. So when the Inland Revenue
started taking an interest in her she ignored their forms and
simply wrote back asking "if brothel-keeping is to be recognised
and taxed, then will my brothel convictions be quashed and my fines
refunded?"
When she eventually
went to court her attempt to pursue the argument that brothel
keeping could not be taxed because it is illegal was fatally
scuppered by what happened next. The Revenue wrote demanding an
affadavit detailing her business affairs - not that they have any
legal right to require an affadavit. And then, by a huge
coincidence, she was called by a tax officer who offered to help
her complete the affadavit in return for sex. He duly arrived, with
a copy of her Revenue file (and with severe body odour) and advised
her to tell the Revenue that her earnings were from prostitution
and not to admit to brothel-keeping because that would amount to
signing a confession to a criminal offence for which she already
had two convictions and was risking a prison sentence if she was
convicted again.
In the meantime she'd
been ripped off by a so-called tax consultant who apparently
charged her for 10 hours work at £200 per hour - this was
1977!
R v Registrar of
Companies, ex parte Attorney GeneralBy 1979 Lindi had
appointed a proper firm of Certified Accountants to act for her and
they recommended forming a limited company as a way of saving tax.
On 16 August 1979 they wrote to the Registrar of Companies saying
that the Inland Revenue Policy Division had informed them that they
considered prostitution to be a fully taxable trade. As there
seemed no good reason why her activities could not be carried on
through a limited company they asked if the name "Prostitute
Limited" was available for registration.
The Registrar didn't
like that name. Nor would he accept "Hookers Ltd." So she offered
him a choice between "Lindi St Claire (French Lessons) Ltd" or
"Lindi St Claire (Personal Services) Ltd" and the latter name was
registered on 18 December 1979. In the memorandum of association
the main object of the company was stated as "to carry on the
business of prostitution." The sole director of the company was
Lindi St Claire, who gave her business occupation as "Prostitute."
Incidentally, Lindi later shortened her name to St Clair after a
punter pointed out that St Claire is an anagram of clit
arse.
The following year the
Attorney General applied to the High Court for the registration to
be quashed on the basis that the Registrar of Companies had
exceeded his powers in registering a company which was not formed
for a lawful purpose.
Sadly Lindi did not
appear in court, nor was she represented, but before the case was
heard she wrote to the court:
I would like to say
that prostitution is not at all unlawful, as you have stated, and I
feel it is most unfair of you to take this view, especially when I
am paying income tax on my earnings from prostitution to the
government Inland Revenue.
Furthermore, I feel
it is most unfair of you to imply that I have acted wrongly, as I
was most explicit to all concerned about the sole trade of the
company to be that of prostitution and nothing more. If my company
should not be deemed valid, then it should have not been granted in
the first place by the Board of Trade. It is most unfair of the
government to allow me to go ahead with my company one moment, then
quash it the next.
The High Court quashed
the registration. Section 1 of the Companies Act 1948 allowed any
two or more persons associated for any lawful purpose to form a
company, and in his judgement the judge said:
It is well settled
that a contract which is made upon a sexually immoral consideration
or for a sexually immoral purpose is against public policy and is
illegal and unenforceable. The fact that it does not involve or may
not involve the commission of a criminal offence in no way prevents
the contract being illegal, being against public policy and
therefore being unenforceable. Here, as the documents clearly
indicate, the association is for the purpose of carrying on a trade
which involves illegal contracts because the purpose is a sexually
immoral purpose and as such against public
policy.
...if that is the
position, as indeed it clearly is on the authorities, then the
association of the two or more persons cannot be for 'any lawful
purpose'.
In a couple of
important respects company law has changed since this case was
decided. It is no longer necessary for a company to spell out its
precise objects in the memorandum of association and it is now
possible for a company to be formed with just one shareholder who
can also be the sole director. At the moment a one- man company
still needs a separate company secretary but even that provision
will disappear once the Companies Act 2006 has been fully
implemented.
So would it be
possible now for an escort to legitimately run her business through
a limited company? Lindi St Clair stated in the public documents
filed at Companies House that her company was formed to carry on
prostitution, and she had a second shareholder (a Miss Duggan) who
might now have faced a charge of controlling prostitution; but a
prostitute setting up a company today would need to do neither of
these things. However the fact that the company was carrying on the
business of prostitution would presumably become clear once it
started operating, at which point it might risk being struck off by
the Registrar of Companies.
In my view it's not a
risk worth taking because if a company is struck off all its assets
are forfeited to the Crown. And I can also see scope for horrendous
legal arguments about the legality of dividends paid out of profits
earned from illegal contracts.
The tax
casesBy 1981 the Inland
Revenue had issued estimated tax assessments for the 8 tax years
1973/4 to 1980/81. The total tax charged was over £110,000 - a
huge figure that was probably influenced by a 1980 ITV documentary
in which she was filmed in her Jag travelling to a Mayfair
jewellers to buy diamonds with her credit card. Her accountant
appealed and negotiated a reduction to £46,000, which was
quite an achievement since she had no accounting records. As Lindi
thought this was still too high it was arranged that the Inland
Revenue Special Office would send two inspectors to see how she ran
her business.
She made sure they saw
everything. The interview was conducted with Lindi topless -
she is a large lady, and at one stage, partly thanks to an
addiction to hula hoops, reached 64KK. She was accompanied
throughout the meeting by three girls in black leather fetishwear
and another stark naked. As well as telling the tax inspectors
about her business and giving them a guided tour of her
"House of Fetish and Fantasy" she took the opportunity to ask them
whether a prostitute could claim tax relief for haemorrhoid cream,
or for the cost of having a tonsillectomy to improve her oral
technique.
In November 1981
agreement was reached with the Inland Revenue. The outstanding tax
was agreed at £40,000 (plus interest for late payment) and the
appeals were settled (under S54 TMA 1970.) That should have been
the end of the matter.
But Lindi didn't pay
up and after 5 years the Inland Revenue sued her for payment of the
debt which, with interest, had now increased to £58,751. She
wrote to the Court pointing out that if the Revenue were to recover
tax on her income then the Crown would be guilty of living on
immoral earnings. The judge decided she had an arguable case and
refused to give judgement for the Revenue.
They appealed to the
High Court.
Inland Revenue
Commissioners v Aken (1987)Outside the court a
group of Lindi's supporters demonstrated with placards and chants
of "The State is a Pimp." Her barrister employed the more
sophisticated argument that the Revenue had acted beyond their
powers in raising tax assessment on income from prostitution and
therefore the agreement which had settled her appeals against the
original assessments was invalid. The Taxes Acts charge income tax
on the profits from any trade, profession or vocation. The word
"trade" is not defined other than "trade includes every trade,
manufacture, adventure or concern in the nature of trade." Lindi's
barrister argued that although prostitution is lawful it cannot be
considered a trade because a prostitute cannot do many of the
things that mark out an ordinary trade such as advertise, go into
partnership, form a limited company, employ people, rent premises
and sue for her debts. It was also argued that managing a brothel
could not be a taxable trade because it is
illegal.
Lindi St Clair lost.
Quoting several leading cases the judge decided that if an activity
is organised as a trade it is taxable even if it is basically legal
but tainted with illegality (e.g. running a business whisky
exporting business in a way which evaded customs duty) or even if
it is wholly illegal (street betting or brothel
keeping.)
His judgement includes
this:
"The reason why ...
profits of burglary are not taxable is not because burglary is
illegal but because burglary is not a trade. Conversely, if the
activity is a trade, it is irrelevant for tax purposes that it is
illegal."
Lindi decided to
appeal.
Inland Revenue
Commissioners v Aken - Court of Appeal 1990According to Lindi's
autobiography she appeared before the three Appeal Court judges
dressed in "fish net tights, a low-cut shiny PVC dress, and a
steel-studded belt from which handcuffs dangled." "I felt that if I
were to be taxed as a tart, I would appear as
one."
It didn't help. She
lost comprehensively.
The judges decided
that prostitution is a trade.
"It consists in the
supply of services for reward on a commercial basis. Although the
bargains made between the prostitute and her clients are
unenforceable as being contra bonos mores neither the bargains made
nor the services supplied are illegal in the sense of being
prohibited either at common law or by statute and made subject to
either civil or criminal sanctions. Both bargains and services are
immoral, but that is all."
The Appeal Court
judges did not disagree with the High Court judgement that illegal
trades are still taxable, but they said the question was
irrelevant. Although Lindi was convicted of brothel-keeping in 1973
and 1976 there was no evidence of her earnings from this illegal
activity, and (thanks to the affadavit she had signed years
earlier) the tax assessments were on her income from prostitution
which is a legal activity.
On the question of the
unfairness of taxing a business which could not legally advertise,
or form a company or employ staff, the court was not
swayed:
"... if a plumber
chooses to ply his trade without doing any of those things which
would constitute crimes if done by a prostitute, he is plainly
still carrying on a trade."
The
Aftermath
The Court of Appeal
refused leave for an appeal to the House of Lords, and in July 1990
the House of Lords Appeal Committee refused to hear her
appeal.
By 1992 the interest
on Lindi's tax debt had taken the total up to £200,000 and the
Revenue Enforcement Department were threatening to bankrupt
her.
In January 1993 Lindi
St Clair's car was found abandoned at the top of Beachy Head. After
a frenzied search orchestrated by the tabloid press she eventually
turned up off the coast of Florida enjoying a cruise on the SS
Canberra. She now lives in rural Herefordshire where she breeds
ducks and sells free range eggs.
Acknowledgements
The main sources for this section are the reports
from the court cases and Lindi St Clair's autobiography "It's Only
a Game" published in 1991 by Judy Piatkis (Publishers) Ltd, and
republished by Pan Books in 1992 as "Miss Whiplash - My Sensational
Life Story." Sadly Lindi's book is out of print but second-hand
copies are available on Amazon.
1. Do-it-Yourself
