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Crazy ideas

OK, so you meet a guy in a pub who says, “I’m surprised your accountant hasn’t advised you to …………….. You could be saving thousands of pounds in tax.”

Here are some great wheezes which really don’t work.

The Limited Company wheeze

Instead of being self-employed why not form your own limited company? Then you could draw a small salary topped up by dividends. You could save a fortune in National Insurance and of course tax rates for companies are lower than for individuals.

For other people this could be excellent advice, but for an escort there are serious problems.

  1. The full names of company directors have to be registered at Companies House and are available to the public. Would you be comfortable knowing your personal details were so easy to find?
  2. The Companies House public register also reveals the year and month of birth of all directors (but not their full birthday, nor indeed starsign), which could be awkward for anyone whose marketing strategy involves a certain amount of economy with their age.
  3. Of course it is possible hide your details by setting up the company with someone else as the sole director. But why would they want to be on public record and also expose themselves to the risk of the criminal charge of controlling prostitution for gain?
  4. If you do set up a company are you disciplined enough about record keeping and ensuring you keep your own money separate from company money? And are you happy to pay extra accountancy fees for the accounts and company tax returns?
  5. And then there is the killer: the case of R v Registrar of Companies, ex parte Attorney-General. In 1979 Lindi St Clair (Miss Whiplash) attempted on the advice of her accountants to register a private limited company which had its stated object: “to carry on the business of prostitution”. The Registrar accepted the registration under the name “Lindi St Clair (Personal Services) Ltd” but in 1980, the Attorney-General applied to the court to quash the registration on the basis that the company had been formed for an unlawful purpose. The court held that the registration should be quashed. Though the company’s objects did not necessarily involve the commission of a criminal offence, contracts for the services of a prostitute would be illegal and unenforceable as contrary to public policy. The company had not therefore been formed for a lawful purpose. The upshot is that if you form a company to carry on prostitution it is likely to be struck off which would result in all its assets being forfeited by the Crown. Ergo not a great idea.
  6. And that leads to a more philosophical point which so far as I know has never yet been tested by the courts. Because contracts involving prostitution have no legal force it is doubtful whether an escort can legally divert her income into a limited company. Any attempt to say “this is the company’s income, I saw the client as agent for the company” risks HMRC responding that the arrangement has no legal validity and is a complete sham, the income belongs to  the escort and we want tax from her; if she has paid it all into a company that’s interesting but irrelevant.

The Charity wheeze

Frankly you’d have to be seriously off your trolley to try this one, but the idea is you register as a charity and then you escape tax altogether. And yes somebody tried it. This is from one of the Ilford newspapers in December 2002:

The boss of a womans charity has appeared in court charged with running a local brothel.

Simon Peters, 54, ran Women Come First, a charity purportedly set up to find homes for women in need, it is alleged. But it is claimed Peters was a pimp earning up to £200,000 a year from prostitution while advertising on the internet. He allegedly used the charity to launder money from a brothel he ran from Ilford High Road, Ilford.

The premises, Bonnies Mansion, were two houses turned into one, attended by four prostitutes working day and night. Bow Street Magistrates Court was told. Peters faces nine charges of living off immoral earnings at the premises between January 1 1999 and December 3 this year.

Peters was arrested on Tuesday. He was remanded in custody for seven days when the court will hear another bail application.

Yes, I know there’s other unpleasantnesses going on in this story. But as a tax dodge it was never going to work.

Peters was subsequently convicted after the jury did not accept his claim to be running a club where gentlemen were entertained with chess and classical music. We don’t know whether he ever paid any tax, but it scarcely matters in the light of the  £732,818.78 Confiscation Order the Metropolitan Police obtained against him.

Dodgy invoicing

This may be tempting but it’s illegal and very dangerous. The idea is that you register with the taxman as some kind of ordinary business, say a computer consultant. Then if you see a client who is himself in business you give him an invoice for computer consultancy which he puts through his books and claims tax relief on. And presumably he’d be willing to pay you more than usual because he is being subsidised by the taxman.

There are a host of problems with this:

  1. First of all you are conspiring with your client to commit fraud
  2. There’s a high risk of getting caught. Sooner or later one of your clients will get a VAT inspection, they will spot you are not VAT registered (because looking for invoices from unregistered businesses is a routine procedure that helps HMRC root out fraud) and do some cross-checking.
  3. You lay yourself open to blackmail from a client.
  4. When you’re caught HM Revenue & Customs will throw the book at you.

Poker

The idea with this ruse is to convert an escort’s income into something that is not taxable – in this case poker winnings.

I’ve seen it suggested that instead of charging a fee the escort challenges the prospective punter to a game of poker with the usual fee as the stake. The escort would of course be an excellent poker player and invariably win. At which point she’d be so excited she’d celebrate by shagging her defeated opponent for free.

The reason it won’t work is that it’s patently a complete sham. If you have a website advertising your services and prices on a commercial basis there is no chance that the Revenue will accept that the poker ruse is a non-commercial transaction and that the players have not come via your website. At the very least you would need to produce examples of poker players who had lost to you but not received sexual services, as well as poker players you had lost money to.

Religious community

There is a special Revenue concession which allows monasteries and religious communities to share all their personal allowances between them. I think it’s designed to cater for situations where one or two nuns work keeping bees or growing and selling parsnips while other sisters devote themselves to prayer and chastity and don’t have enough income to use their personal tax allowances.

I was once asked by a lady, who seemed to be serious, whether a religious community of working girls devoted to providing female comfort to men in need, could take advantage of this concession. The Sisters of Perpetual Succour, I think they were to be called.

The answer is no.

 

 

 

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