Several papers are carrying the story of Donna Asutaits who has been jailed for 16 months at Southwark Crown Court after pleading guilty to the common law offence of Cheating the Public Revenue out of £120,000 of tax.
Interestingly (for reasons I will come on to) HMRC have yet to issue a Press Release about the case so the only information I can find is from various newspaper reports. The Daily Mail has the most detailed report, and there’s a slightly shorter one in the Personal Finance section of the Daily Telegraph. The Sun and Express also cover the story. As ever with stories about tax or about prostitution the reporting may not be entirely accurate; indeed the Mail don’t seem quite sure whether her surname is Asutaits or Asutaitis.
The basic reported facts are that she earned £300k between 2005 and 2007, didn’t submit any tax returns and evaded £120k of tax. As you would expect the papers make much of the fact that she apparently charged £1,000 per night which earns her the Daily Mail’s soubriquet of ‘high-class hooker.’ They also report with some relish the fact that she was able to put down a £110,000 deposit in cash for a flat she bought in Kensington. Large amounts of cash were also found when her flat was raided: £72,000 in 2007, and £8,350 in 2010 along with another £50,000 in a safe deposit box.
Before looking at some of the very curious details of this case there are two immediate lessons to be drawn.
- Income from escorting (or any other form of prostitution) is taxable and if you don’t register and pay tax you risk prosecution. As the judge said to Ms Asutaits “In my judgment this was an offence that was fraudulent from the outset carried out over a significant period of time.” It should be noted in passing that if you confess and pay up before they catch you, HMRC are very unlikely to prosecute – though you will still have to pay the tax, interest and penalties, but it will be handled privately out of view of the press, the public and your relations.
- If you’re buying a flat and turn up at your solicitors with £110,000 in cash without a damn good explanation for where it came from they are going to make a Suspicious Activity Report to the Serious Organised Crime Agency. They have no choice.
Turning back to the case itself. There are some really very odd things going on here.
- According to the reports her escorting earned her £300,000 in just 2 years, and this is apparently calculated on the basis that she earned an average of £3,000 per week. Is this realistic? No of course it isn’t. Like many escorts she offered overnight bookings at £1,000, but I doubt she sold many. As restaurant owners, car dealers and supermarkets all know, if you add a high priced item to your menu you won’t sell very many but psychologically it makes everything else seem better value and you sell more mid-priced and less low-priced items. There is plenty of research showing that it is worth adding a very high priced item to your menu even if you never sell any, because it gives you a better mix of mid and low priced sales. It is also certainly true that a small number of established escorts can make a lot of money. But it takes a great deal of hard work and time to build up a reputation and a client base. It is simply not credible that a 24 year old (in 2007) was able to earn £150,000 a year.
- The jail term of 16 months seems unduly harsh. Compare that with a 49 year-old man, who evaded tax for 11 years on income of over £1M. His case had aggravating factors of forgery and false documentation, and the tax lost was much higher at £400,000, yet he received only 15 months.
- In court prosecuting counsel Jonathan Polney said: “… in relation to another investigation, police carried out a search of her property and found £72,702 in cash.” So police found the cash while they were investigating a completely different crime.
- Ms Asutaits pleaded guilty to the tax offence, but not guilty to two other offences, both of which were allowed to lie on the file (i.e. the charges were not pursued in court.) One of these was a charge of money laundering £110,000 for alleged criminals Rizwan Chaudury and Raj Koi. Remember the £110,000 deposit she paid on her flat? So she has denied that this money was the proceeds of a crime which she was laundering on behalf of these gents, and instead admitted it was from escorting.
- “When she was arrested she read out a pre-prepared statement in which she said she had been a self-employed escort for about ten years, and that she was often paid in cash and received valuable jewellery in gifts.” A pre-prepared statement eh? I’m reminded of a tax investigaton interview with a client (a taxi driver as it happens). When asked by the Inspector about the source of some unexplained deposits into his personal bank account he announced that his wife was on the game and they were her earnings. When it was pointed out that in that case they would be taxable and the Inspector asked how he thought his wife would like them to be described on the assessment he quickly re-thought his position.
There could be a lot more to this case than just escorting and tax. Maybe that’s why the case doesn’t seem to have been brought by HMRC?
I will keep a look out and if HMRC do issue a Press Release I’ll update the post.