So it’s good news for the minority of escorts who moonlight as plumbers and heating engineers, but what about everybody else?

Although the Plumbers Tax Safe Plan is aimed squarely at plumbers the documents make it clear that it applies to other professions too.



What if I’m not a plumber but I want to get up to date with my tax?

If you are not a plumber, you may still find that the forms cover everything you need to tell HMRC. If that is the case, you can still use PTSP forms. You should notify and disclose following the instructions in this guidance. Please ensure that you show your correct business or trade on the forms, making clear that you are not a plumber. If you don’t provide this information your disclosure could be sent back for completion.

Customers who voluntarily come forward and put right their tax position can expect very similar terms to those on offer through PTSP. If you do not come forward and HMRC later find that you owe additional tax, you may face higher penalties or even criminal investigation.

Why would you want to take advantage of this amnesty?

1. The penalties are much lower. When tax is underpaid HMRC have the right to collect not just the unpaid tax (with interest) but also penalties, which can be up to 100% of the tax. Underpaying tax by £10,000 could result in a bill for £20,000 – plus interest. Under the PTSP the penalties will be zero if the underpayment arose from a  mistake, 10% if it arose from carelessness, and 20% if it was deliberate but not concealed. Deliberate concealment will still attract a 100% penalty, but a good accountant should be able to argue your circumstances into one of the lower categories.
2. If your sin is a mistake you will only have to go back over the previous 3 years, and for carelessness 5 years. But a full blown tax investigation could go back over 20 years.
3. Time to pay. The Revenue are promising to agree sensible instalment plans for clearing tax arrears.
4. Disclosing the information yourself is going to far, far cheaper and less stressful than responding to the questioning of a tax investigation – even if you use an accountant.

But if you want to take advantage of the amnesty you’ll have to act fast. You need to tell HMRC by 31 May that you plan to make a disclosure, and then submit the full details by the end of August.

So if tax nightmares are disturbing your sleep there could be no better time to consult an accountant.

PS. It’s not just my view that the amnesty is open to those of us who wouldn’t know a ballcock from a grease nipple. The Tax Faculty of the Institute of Chartered Accountants agree with me (which is always nice) and if you google Plumbers Tax Safe Plan you can see what the accountancy firms are saying.

Where a person in the public eye claims a deduction for the cost of cosmetic surgery to correct some perceived inadequacy in their appearance then you need to examine whether one of the purposes in incurring those costs was to gratify their private wish to improve/change their appearance. If it was, no deduction will be due. Only in exceptional circumstances will an operation to change personal appearance by reversing or masking the advancing of the years not have a private purpose. You should invite the Commissioners to infer the existence of a private motive unless there is compelling evidence to the contrary.

In most cases cosmetic surgery will at the very least boost self-esteem and may improve your private life. Breast augmentation, face lifts or tummy tucks are all going to have at least some element of private purpose and are not going to qualify tax relief. But what about Lindi St Clair’s utterly inspired question to the tax inspector who was sent to interrogate her? Could she get tax relief on the cost of having her tonsils removed so as to improve her technique at giving oral sex? It’s hard to see much personal benefit, and provided there was no medical reason for a tonsillectomy, I’d say there’s a good case for saying yes. Sadly Lindi’s biography doesn’t record what answer, if any, she was given at the time.

• Payment of wages to yourself.
• Your £2.40 a week NI contributions.
• Bribes.
• Payments in response to threats, blackmail or extortion.
• Fines.
• Membership fees for the gym. It may be important to your business that you keep fit but the Revenue take the view that it’s not wholly and exclusively for the business.
• Similarly you can’t claim for hairdressing, manicures, colonic irrigation or plastic surgery.
• Health insurance, accident insurance, income protection insurance or life insurance.
• Childcare and baby-sitters.
• Vibrators. My careful observations strongly suggest there is a personal benefit to their use.

• Anything you buy and sell on to your clients. For example if you sell worn knickers to your clients then the cost of buying them is allowable. Obviously you also need to include the money you receive from your client as part of your income.
• Payments to your driver. You ought to make sure he recognises he is self employed and needs to tell HMRC about his income from you. A receipt from him would be nice, but if he doesn’t want to declare it you can hardly claim tax relief. And if your driver is your partner there’s no point in paying him if he’s already a tax payer – you’ll get the tax relief but he’ll have to pay about the same amount in extra tax.
• Rent for any flat or accommodation you pay for and use just for business.
• And if you use a flat just for business you can claim for any council tax, water rates and heating and lighting bills that you have to pay.
• If you work from home you can claim a proportion of your council tax, water rates and utility bills.
• Advertising
• Agency fees
• Photography for advertising
• Web-site maintenance
• Telephone – the business proportion
• Internet charges
• Bank charges if they’re for a bank account you only use for business
• Travel expenses for business journeys – e.g. train fares, taxis, car parking. Of course you must have paid for them. You can’t claim for an airline ticket if the client paid for it.
• Subsistence. If you are working away from home and have to stay overnight then you can claim for the reasonable cost of hotels and subsistence including lunches. You do of course have to actually pay for the cost before you can claim tax relief – you can’t claim for an evening meal if your client paid for it. If you are not staying away from home overnight you can still claim for modest lunch expenses if you habitually travel on business or make occasional business trips.
• Protective clothing – unless you get them free from the GUM clinic!
• Uniforms. Clothing is a bit of a minefield because the Revenue take the view that most clothing isn’t bought ‘wholly and exclusively’ for the business but also for the personal benefits of warmth and modesty. Protective clothing is fine, so you can claim for the steel toe-capped boots and the boiler suit. But there’s a problem with everyday clothes even if they’re clothes you wouldn’t otherwise choose to wear – there is a legal case (Mallalieu v Drummond) where the House of Lords threw out a claim by a female barrister who said she only bought black clothing for work because, being blonde, black didn’t suit her. So my advice would be to claim for uniforms (the pvc nun’s habit and the traffic warden’s rubber tunic) but not dresses and lingerie that you might wear outside work. And if you are a barrister, as well as an escort, you can claim for a barrister’s wig and gown.
• Similarly the cost of entertaining is not normally allowable. However if part of the package you are selling to your clients includes entertaining him then the cost would be allowable. So if you advertise that as part of your service you will cook him a three course lunch while dressed only in stockings, suspenders and high heels then the cost of providing his lunch would be an allowable expense. But if as part of an evening date you buy a round of drinks that would not be allowable.
• Make-up etc is likely to get caught by the wholly and exclusively rule. The best plan is probably to have a separate bag of work make-up.
• And last, but by no means least: accountancy fees are allowable.

The wholly and exclusively rule means that any expenses which have a mixed personal as well as a business purpose are not allowable. The classic example is clothing. Although you may say that you only ever wear business suits for work, the Revenue will argue that there is a mixed business and personal purpose because you also wear this clothing to keep warm and for reasons of personal decency.

But expenses don’t have to be necessary to the running of your business, or even commercially sensible, in order to be allowable. For example you might decide to spend £10,000 on professional photographs for your business website. It’s clearly not essential to your business that you invest so much, and it might be extremely bad value for money, but it’s also clearly wholly and exclusively for the purpose of your business, so it’s allowable.

The revenue and not capital rule means that you can’t get tax relief on the cost of acquiring an asset of continuing benefit to the business. That might include the cost of buying a car or having a blacksmith build dungeon equipment for you. There are separate rules which allow you to claim relief on capital expenditure. Of which more later.

If you work through a parlour the typical arrangement is that you receive the punter’s payment and then hand it all to the maid for safe-keeping. Then at the end of the shift you get back your share after the house percentage and the maid’s share have been deducted. Your income is the total amount initially paid to you by the punter, while the deductions for the house and the maid are allowable expenses. The end result is the same unless you are VAT registered or ought to be.

Escorts working through an agency usually get the full fee from the punter and then account to the agency for their booking fee. Again the total fee paid by the client is your business income, and the agency payment is an allowable expense.

Cash tips should also be included in your business income.

Payments in kind are included in business income but small gifts of things like flowers, chocolates, underwear or perfume would not normally be taxable. But they must be gifts and not part of the agreed fee. So announcing on your website that your normal fee is £300 but you’ll give a freebie in return for cup final tickets is asking for trouble. And large and expensive gifts (cars, boats, expensive jewellery) could raise a few eyebrows at the tax office. If you routinely sell all the gifts receive in e-bay I can see HMRC arguing the proceeds are part of your business income.

But beware. I know of one dominatrix who has a section on her website inviting worshippers to ‘adopt’ her household bills: council tax, TV licence, student loan repayments etc, all of which are listed in detail with amounts and in some cases the ‘name’ of the person who has adopted the bill. Without a doubt, that is going to be taxable.

Of course there is no problem with receiving hospitality as part of a booking. So you won’t pay tax on the cost of a punter buying you dinner, taking you to the opera or flying you both to Lapland to visit Santa.

Income tax and NI are annual taxes. They are charged on what you have earned in each tax year. In principle you can prepare your accounts and work out your profit up to any convenient date each year but it’s usually easier, and a lot less confusing if your accounts year coincides with the tax year. Unfortunately the tax year ends on 5 April, which is plainly silly so HMRC are quite happy for you to do your accounts up to 31 March each year and pretend it’s the end of the tax year.

Put simply, your profit each year is your business income less your allowable business expenses. Or, more obtusely, your profit must be calculated so as to give a true and fair view in line with UK GAAP (UK Generally Accepted Accounting Practice) and the FRSSE (pronounced frizzy, and standing for the Financial Reporting Standard for Small Entities) unless they conflict with tax legislation.

If you want to know why the tax year starts on 6 April there’s a future article coming that will make everything crystal clear. And if you want to know all about UK GAAP and the FRSSE you need medication.

However if you are careful and organised, and if your financial affairs are not complicated, it is still perfectly possible to deal with your own taxes. This section is designed as a step-by-step guide to doing it yourself.The danger with DIY tax lies in what Donald Rumsfeld called the unknown unknowns – the things that you don’t realise you don’t know about. I have a mate who is a surgeon and who assures me that in a few days he could teach almost anyone to remove an appendix. But what takes years is to teach a trainee surgeon to recognise when something is going wrong and to know what to do to put it right. Fortunately dealing with your own tax affairs is not usually as urgently life threatening as DIY surgery. If you begin to feel out of your depth in the middle of filling in your tax return you can usually afford to wait a week or two while you take advice.

DIY tax doesn’t mean taking all your papers along to the tax office just before the tax return deadline and sitting down with a guy on the Revenue enquiry desk while he helps you fill in your tax form. Yes, he’ll probably do it for you, but he probably won’t have the expertise or understanding of your business to make sure you claim for everything to which you are entitled, and he certainly won’t have the time to do a careful job or any interest in giving you advice on reducing your tax bills.

Undoubtedly a large number of escorts don’t pay tax. But if you’re in business to achieve financial independence and security for yourself and your family does it really make any sense to put that at risk by ignoring the taxman?

Don’t worry. I’m not suggesting you trot along to your High Street bank and fill in a form to set up a small business account in the name of “Jane Smith trading as BustyBunny of Bungay.” A name like that won’t fit on your cheque book and you don’t want to end up paying business bank charges.

What I suggest is that you get a second personal account and mentally designate it for your business. And if you pay for hotels and travel with a credit or debit card then get a second one of those too. All you need to do then is keep your business income and expenditure in these separate accounts. Then as your income starts to build up you can pay yourself from the profits by making a transfer from this business account to your personal account.

There are several advantages of doing this. First of all it separates your business and personal expenses and makes it much easier for you to keep track of your business transactions and make sure you record them all in your books.

But there is a more important reason. HMRC have the right to ask you to produce the records which support the entries you make on your Tax Return. If you have a separate business bank account then all you would have to produce to them is your business bank statements and your account book. But if your personal and business transactions all go through the same bank account you could be faced with sending in your personal bank statements, and then trying to convince the taxman that the £150 you received in August was from granny towards the children’s school uniforms, and £2,000 came from the sale of your boyfriend’s motorbike and not from an overnight.

What you are trying to do is protect yourself from the taxman’s attentions by having a set of books and records which are consistent with each other and don’t leave open invitations for questions to be asked.

Of course if you are subject to an in-depth inquiry then you may have to produce all sorts of personal records to HMRC but even then if you can demonstrate you are careful to keep business and personal transactions separate, you will be on much stronger ground than if everything is swilling around in the same account.