HEMEL HEMPSTEAD, UNITED KINGDOM–(Marketwire – March 18, 2013) - Haven want to make holiday home ownership easier for new owners or upgrading owners in 2013 by introducing the ‘Beat the VAT’ scheme.
Tax problems, being classed as ‘sex encounter venues’ and bad business deals pushed chain deeper into the red
It has become a bellwether for the City, its fortunes closely mirroring those of the Square Mile’s high rollers. So perhaps unsurprisingly, given the current economic turbulence, Britain’s most famous chain of lapdancing clubs appears to have been experiencing a bumpy ride of its own.
In the week that it applied to run the country’s first 24-hour lapdancing club, in London’s Tottenham Court Road, Spearmint Rhino has filed accounts showing that it ran up a loss of £2.1m in 2011.
The figure – some £1.4m more than the loss from the previous year – was despite the company’s clubs pulling in an impressive £9.9m in revenue, up from £8.5m the previous year.
But the chain’s critics are unlikely to shed too many tears. “Any profit that lapdancing clubs like Spearmint Rhino make is off the back of exploiting women. It is time that councils use their licensing powers effectively to clamp down on these sexist sex establishments,” said Anna van Heeswijk, acting chief executive of Object, the campaign group that opposes lapdancing clubs.
Operating profits at the chain fell to £429,000, down from more than £500,000, but rising administration costs and ill-fated business ventures drove the company’s figures deeper into the red.
The small print reveals that the company, which paid £3.5m in wages to its 162 employees in 2011, was forced to write off a £2.8m loan to a related company. It also shows that the company’s founder and director, John Gray, believed to have been paid a salary of £304,000, resigned in April and that no dividend was paid.
And there are further financial demands on the company to be resolved. The accounts reveal that the company owes HM Revenue and Customs more than £2m, which it has agreed to repay under a “time to pay” agreement.
In addition, the accounts confirm that the chain owes Spearmint Rhino Worldwide Inc, the company that owns 12 clubs in the US, almost £3m.
An HMRC spokeswoman said that it could not discuss the tax affairs of an individual business. She explained: “A time to pay arrangement is given on a case by case basis. The amount of tax and revised payment schedule can vary dependent on how much is owed and over what period of time. Interest is still payable on tax paid late, even if through a time to pay arrangement.”
Spearmint Rhino’s battles with the Revenue go back years. In 2007, it successfully appealed against a ruling that it had to pay VAT on the earnings of its dancers. David Milne QC, representing Spearmint Rhino, argued that the club should not pay because it was “the dancer and not the club that provided the services”. The ruling meant that the chain’s lapdancers were potentially liable for VAT.
Spearmint Rhino has been at the forefront of the UK’s lapdancing revolution, which has seen the number of clubs soar to 300 – a 50% increase compared with 10 years ago. The Lapdancing Association claims that 25,000 people in the UK now work in an industry that generates £2bn a year.
But the rise in the number of clubs now appears to have been checked. A law change in 2009 meant that the clubs were classed as a “sex encounter venue” and subject to more stringent licensing conditions.
Many cities have now stopped granting licences to new clubs while others, notably Oxford, has declined to renew them.
Spearmint Rhino, whose Birmingham club is reputedly the largest lapdancing venue in the UK, has itself retrenched. It now runs only five clubs, compared with nine in 2008. However, its management has said it has plans to expand and to take on 60 new dancers.
Requests for comment from the company were not returned.
Fifteen convicted in five trials for faking sale of 4m phones through ghost companies in complex £176m VAT scam
Fifteen people have been convicted of trying to steal £176m from the public purse in one of the largest and most complex mobile phone tax frauds yet uncovered.
The case, which has involved five separate trials and concludes on Tuesday with the sentencing of a Brussels freight company owner, came to light after investigators discovered a trail of ghost companies reselling nonexistent phones.
After a three-week investigation, officers found nearly £47,000 in cash hidden in the boot of a car belonging to John McFarnon, chairman of Unique Distribution, a well-known and partly legitimate mobile distributor.
The ringleader, Dilawar Ravjani, is to serve 17 years, the longest penalty imposed for so-called carousel fraud, after masterminding the attempt to illegally reclaim millions of pounds in VAT payments from HM Revenue & Customs (HMRC).
Investigators were alerted after they discovered the gang had been claiming to trade phones made by Sony Ericsson and Samsung which, although they had been unveiled in promotional campaigns, were not yet on sale. The gang pretended to have sold more than 4m mobiles phones worth £1.7bn, most of which never existed. It is thought a further 50 companies, some of them established distributors, may have been linked to Ravjani’s scam.
A total of £170,000 in cash was found during the clampdown, codenamed Operation Inertia, including £80,000 stuffed into drawers at one of Ravjani’s companies, Future Communications, which investigators believe was to be used to pay off accomplices at other companies.
“This is one of the largest carousel frauds we have done,” said the HMRC criminal investigations director, Donald Toon. “The people who run these scams aren’t isolated individuals. Some of them are professional major fraudsters and it’s a massively international game.”
One of those convicted, John Conroy, found to be a covert backer of the scam and a shadow director of Unique, was resident in Marbella in Spain. Future’s finance director, Zafar Chisthi, fled to Pakistan before his trial. He was sentenced in his absence to serve 11 years and remains in hiding.
The transgressions took place over just eight months. The companies involved, based in Stanmore in Middlesex and Abingdon in Oxfordshire, hoped to siphon a maximum amount in monthly VAT repayments before tax inspectors caught up with the scam.
The false trades are believed to have begun with a ghost company based in the UK claiming to have imported thousands of phones from Belgium. Sony Ericsson had just announced its P990 handset, and the company claimed to have imported 90,000 of them. It claimed a further 96,000 Samsung Serene handsets had been brought into the UK.
But the gang had failed to spot a manufacturing delay that meant neither model had left the production line at the time. The phones passed through other “buffer” firms, before being bought by Future.
A chain of five or six ghost companies was created to muddy the waters. More than 5,700 individual trades were recorded, some taking just a day to pass through the entire chain. Future, at the end of the chain, would then claim to have sold the phones to a ghost company in Europe.
Because companies cannot claim the cost of VAT payments back from their European counterparts, the UK tax authorities reimburse VAT on any items bought in the UK but sold abroad. This is done in order to encourage exports.
However, following a clampdown on VAT repayments where the first company in the chain has gone missing, Future was unable to make its false claims and forced to change tack. It then began importing the phones itself, and selling them on to its sister company Unique and as many as 50 other distributors, both real and shell companies. Unique would then sell the phones to a European company and claim the tax back.
The scam also involved two freight companies, A1 Freight in Staffordshire and Boston Freight in Belgium. Vans shuttled across the channel, generating documents to prove goods had crossed borders.
When investigators raided Boston Freight, they found three vans loaded with pallets of phones, but the handsets in questions were low-value devices, which they believe may have been dummy cargoes designed to throw customs off the scent. The high-end Sony and Samsung devices shown on the paperwork were never found.
Three successful VAT repayment claims were made from November 2005 to June 2006, totalling £107m, before the fraud was stopped. The money, which officers are attempting to claw back, was laundered through offshore bank accounts, property and car companies. Future had attempted to claim a total of £176m.
Investigators’ suspicions were confirmed when they discovered Unique had, during the eight months in question, declared eye-catchingly large sales of £2.2bn but paid a total of £17.74 in VAT.
When Unique’s offices were raided, they found a majority of staff working on low value but legitimate trades such as reselling airtime, while a small team were employed generating the bulk of the company’s income from the carousel fraud.
“This was theft from the taxpayer,” said Toon. “It fundamentally undermines the UK tax base and that’s why the enforcement response is so critical.”
Marshall Boston of Boston Freight is due to be sentenced at Kingston crown court on Tuesday .
New economic analysis talks not of Westminster’s fight over thinning turf but of change as something we do for ourselves
You’ll be pleased to hear that I’ve figured out why David Cameron’s plans sound like a throwback to the 60s, and Labour’s response sounds like a set of compromises urging nothing more than restraint. (Retrench, but only back
Let’s face it – the chancellor is logically correct that pasties are ‘hot food’ just like kebabs, and therefore subject to VAT. But politically, a pasty tax is still bad policy
As the pasty tax protest rolls up at the gates of 10 Downing Street, it is time to say that the chancellor is right – and wrong at the same time.
It is fair to describe pasties as hot food and therefore subject to VAT. In almost all shops they are served hot because consumers wouldn’t want them any other way. They are cooked in small batches to make sure they don’t hang around on the shop counter for long.
Why, George Osborne rightly asks, should his local kebab shop owner be forced to charge 20% on a doner while the Greggs next door gets away with selling a VAT-free sausage roll just because the meat is wrapped in pastry and not pitta bread?
Stephen Gilbert, the Lib Dem MP for St Austell & Newquay, makes the spurious point that it is “simply wrong for the government to impose a tax on the humble Cornish pasty while luxurious caviar remains tax-free”. But we are talking about cooked food, offered hot to the consumer.
Nigel Lawson was explicit in the 1980s, when he applied VAT to hot food, that pasties should be exempt. But he failed to provide a rationale for why such baked goods should escape tax. Maybe, unlike Osborne, he liked a quiet pasty supper while reading his red boxes in No 11.
But was George’s VAT hike, however limited, a sensible policy? When ordinary families are struggling against inflation at 3.5% and wage rises limited to 1.1%, the last thing they need is the cost of their lunch to jump in price. Undoubtedly, pasties and sausage rolls are eaten by lower income groups more than Osborne’s circle of friends (David Cameron excepted, of course). And where there is a price rise, there are jobs at risk – and plenty of pasty makers are family-run firms in Britain’s depressed regions that need all the support they can get.
Gilbert says 400 jobs in his constituency are at risk, as is £7.5m to the Cornish economy, which is not the result Britain needs at the moment when unemployment stands at 2.65 million and youth unemployment above 1 million.
The wider point is that the government needs to adjust its income away from taxes on work to taxes on consumption and wealth. There are many consequences of such a shift in tax policy, but the main one would be to increase incomes from work – which would make pasties, even with VAT, affordable for everyone.
Former foreign secretary Lord Hurd attacks a government plan set out in the Budget to introduce VAT on church renovations.
Read the original here: Hurd attacks church VAT rise plan
The outcome of the Channel Islands’ legal campaign to save VAT relief is due to be announced later.
Original post: VAT case decision expected later
• Consumer price index drops from 4.2% in December to 3.6%
• Retail price index falls from 4.8% to 3.9%
• Sir Mervyn King still forced to write to chancellor
• Retailers forced into discounting
Bank of England governor Sir Mervyn King is likely to signal on Wednesday that he stands ready to unleash a fresh round of quantitative easing if the economy fails to bounce back, after news that inflation dropped sharply last month, to 3.6%.
The office for national statistics said the consumer price index had declined from 4.2% in December, to 3.6%, its lowest level since November 2010, as the impact of the coalition’s VAT rise dropped out of the annual comparison.
“The confirmation that inflation is falling is likely to encourage the MPC to continue to gradually expand QE in order to give more support to the economy,” said Michael Saunders, UK economist at Citi.
King has long predicted that inflation would start to fall back towards the Bank’s 2% target once one-off effects such as the VAT rise and last year’s spike in oil prices started to ease.
But when he sets out his latest assessment of the prospects for the economy at quarterly inflation report briefing on Wednesday, the governor is likely to repeat the sobering message, spelled out in an open letter to the chancellor, that, “although inflation is now falling broadly as expected, the process of rebalancing still has a long way to go. Growth remains weak and unemployment is high.”
Under the terms of the Bank’s independence, laid down by Gordon Brown in 1997, the governor must write to the chancellor each time inflation remains more than 1 percentage point above or below the government’s 2% target for more than three months.
The missive was the eighth time King has written to Osborne since the coalition took power.
“The unwelcome contribution of sluggish growth and high inflation over the past two years is a reflection of the need for the economy to rebalance following the financial crisis and associated deep recession, together with rises in the costs of energy and imports,” King wrote.
The Bank’s monetary policy committee expects inflation to fall rapidly throughout 2012. At its February policy meeting, it announced a £50bn increase in its asset purchase programme, taking the total of electronic money it has spent on trying to boost the economy to £325bn.
Howard Archer, of the consultancy IHS Global Insight, said there should be a fresh decline in February, because many shops delayed passing on last year’s VAT increase until the end of the January sales. “Consumer price inflation should fall appreciably further,” he added. VAT was increased from 17.5% to 20% last year as part of George Osborne’s deficit-reduction plan.
However, Brendan Barber, general secretary of the TUC, stressed that despite the decline in inflation, living standards are still falling for many in Britain. “With prices still increasing twice as fast as wages, workers are still getting poorer month-by-month while high unemployment and wage stagnation persists,” he said.
With Osborne determined to stick to his policy of austerity after the decision by the Moody’s rating agency to cut the UK’s outlook to negative, the Treasury is relying heavily on the Bank to boost the economy with its £325bn of quantitative easing.
But King also used his letter to warn the chancellor that “there is a limit to what monetary policy can achieve.”
Osborne replied that monetary policy is “the first line of defence in the face of economic shocks”, and insisted that the government’s deficit reduction strategy had created the room for the Bank to act.
Retailers have been forced into discounting amid tough trading conditions on the high street. Over the past two months, inflation has fallen by 1.2 percentage points. The ONS said that was a larger decline over two months than at any time since 2008, when Alistair Darling cut VAT as part of his emergency rescue package.
On the wider retail price index measure, which includes housing costs, inflation fell to 3.9%, from 4.8% in December, the ONS said.
High inflation, and the resulting belt-tightening by workers who have faced declining real incomes, was blamed for much of the shortfall in economic growth in 2011, with GDP expanding by just 0.9%.
Aside from the VAT cut, the ONS said the price of fuels had fallen as had “products bought in restaurants and cafes”, tobacco, and vehicle maintenance and repair.