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Dear John

Tax worries

First published 22nd December 2005 (updated Feb 2008)

Question:
With all the recent letters about tax investigations in The Stage over the past few issues, I'm getting really worried about my own situation. My own tax affairs are in a fairly chaotic state, with this year's return late and a large bill I absolutely can't pay. I didn't register for tax for a number of years after starting my career. Honestly, it wasn't because I didn't want to pay - it was simply because I didn't know how to sort my finances out (well 'want' to pay is probably too strong a word but I do know it has to be done).

I eventually did make a start when I got some TV work and the production company wouldn't pay without a tax number. After I registered, I ended up getting an accountant recommended by a friend who isn't in the entertainment business, who didn't seem to know a lot about what I could and couldn't claim for. Then the TV work dried up and I had to use the money I'd been saving for tax for living expenses. Now I've got a bill to pay which is actually more than my total earnings for the past year. Interest is mounting and I'm starting to get increasingly scary demands. The Catch 22 is that to pay the bill, I've got to earn my living as an entertainer - but it is very hard to be entertaining when I'm losing sleep over the prospect of ending up in court or possibly in jail!

Answer:
Okay, bad news first. I would be lying to you if I told you your situation isn't very serious because it is. It is also one that quite a few other people reading this may well be in to a greater or lesser extent. Despite the 'luvvie' caricatures, there is no single stereotypical performer personality. However, there are some common traits that a lot of performers seem to share. Creativity is one of them. Unfortunately, in a lot of cases, good financial management isn't. And as my accountant and tax officer will tell you, I speak from personal experience.

So the first thing to be clear on is the fact that tax bills and the taxman do not go away. They just get bigger and more relentless the longer you leave them. So if you are struggling in this area, you need to get professional help and fast. Some performers are good with figures and can sort out their returns and save accountancy fees with one of the popular computer programmes and a good 'how to' book. Mike Truman's Teach Yourself Small Business Accounting is one very helpful one. For the rest of us, it is important to get help from a professional and one who knows the industry we work in.

Tax officials are determined and dogged in their pursuit of unpaid tax but they are not monsters and they do understand that people get into difficulties. But the onus is on you to communicate with them to let them know that you are a 'can't pay' not a 'won't pay' and, very importantly, what exactly you can pay now and how soon you can come up with the rest. But just as you wouldn't represent yourself at court (I hope!) you need informed advice on how best to manage this situation because they do not suffer fools gladly. Nor should you - if your accountant is taking your money and leaving you to sink or swim alone, make them walk the plank and get someone different.

The Inland Revenue's own website at www.hmrc.gov.uk has information on payment problems and the independent charity at www.taxaid.org.uk has a site full of advice for anyone with tax troubles who can't afford an advisor - a worthwhile and underfunded charity well worth donating to for anyone who's had a rebate or conquered their own tax woes.

It may be a long and hard road but resolving to address rather than simply fret about your tax issues will ensure not only that you have less sleepless nights but that 2006 will be a year of moving forward rather than running away.

With that in mind, and as this is the last Dear John before Christmas, I'd like to thank everyone who has written in over the past year. I'd also like to thank readers who have contacted me with their own advice, experiences and further help for queries dealt with. Mine is not the only opinion and feedback is always welcome. The growing size of the mailbag means I may not have got to your letter yet but I'm working through the backlog as fast as I can. Since we often get many variations of the same enquiry, do check out the Dear John archive on The Stage website, where a similar query to yours may have been dealt with before.

As an agony uncle, I'm not sure it's in my best business interests to wish you a happy Christmas and successful New Year - I'd be out of a job! - but I'm going to do so anyhow. Whatever 2006 brings, rest assured that we are looking forward to continuing to help you cope with it.