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Michael Basman and the tax bill
January 22, 2017
The following is from The Sunday Times. It is on subscription and probably most readers will not be able to link to it.
http://www.thetimes.co.uk/edition/mo...bill-p868nr98c
I will give the facts of the case but omit the conclusions of the court and the tax advice to others in the same situation.
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Chess master has no defence against £300,000 VAT bill
Michael Basman’s ruin after years spent turning pupils on to the game is a warning to us all
Nina Montagu-Smith
January 22 2017
The Sunday Times
Michael Basman, an international chess master, ran a national schools’ chess tournament for 20 years but was forced into bankruptcy after a lengthy battle with the taxman
Death and taxes are the two things on which we can absolutely rely, so attempting to put either on hold indefinitely is never going to work.
Sadly, the international chess master Michael Basman, 70, has discovered to his cost how true this is when it comes to dealing with the taxman.
He is a well-known figure in chess circles — he tied for first place in the 1973 British Chess Championships but lost the play-off, and in 2013 was presented with a special award for services to chess by the World Chess Federation at 11 Downing Street.
Basman does not just play a superb game of chess — he has also worked tirelessly to introduce the game to children in Britain through his own annual tournament. Introduced in 1996, the UK Chess Challenge ran for 20 years and, at its height, attracted about 70,000 entrants from 2,000 schools.
However, for Basman its success has been terribly overshadowed. Last year he was forced into bankruptcy and made to sell off the tournament, all because he failed to charge VAT on the tickets that schools and parents bought to take part each year.
He never made a profit from it and all revenues were declared for income tax to HM Revenue & Customs (HMRC) on his annual tax return. When the taxman came knocking for VAT from the ticket sales, though, he did what many in his position might feel tempted to do, but should not: he hoped it would all just go away.
Now he is bankrupt and owes about £300,000 to HMRC, although he has managed to reduce this bill by £40,000 through the forced sale of the tournament. Worst of all, his ex-wife, who is elderly and unwell, faces eviction from her home, which Basman co-owns, in Chessington, southwest London.
“HMRC’s main argument is that I should have charged VAT on the tickets to the tournament and paid it to HMRC, but we had 50,000 kids a year on average taking part and I just didn’t have the time — the admin is quite considerable,” Basman said. “Also, I do object. Adding 20% to the cost of tickets makes it even harder for poorer kids to take part.”
How did the tournament work?
Each year, the competition took place in four stages. The first was held within individual schools, which each paid Basman £40 to enter up to 30 children. Those that got through to the next stage went on to compete at county level, usually hosted in a school, where tickets were £15 per child. At the next two stages — northern and southern regionals, and the overall national final — tickets were, again, £15 per child. The majority of this revenue went into a total prize fund of £20,000. Prizes ranged from about £500 at the lower levels, to £6,000 at the final.
On each ticket, he should have charged the standard rate of VAT, currently 20%.
Some years ago, HMRC suggested Basman set up as a registered charity, but this again seemed too onerous and time-consuming, even though it would have saved him the bother of charging VAT. After years of discussions, the case came to a tribunal in September 2013, and Basman was ordered to pay £300,000 in tax.
The tribunal concluded that Basman focused on the “unfairness of the VAT system and his view that complying with his VAT obligations is equivalent to forced labour and slavery. He argues that the forced completion of these obligations is in contravention of the European Convention on Human Rights . . . We do not consider that complying with normal tax record-keeping, accounting and filing obligations amounts to slavery or forced labour.”
Basman also argued that learning and playing chess had beneficial effects and so should not be subject to VAT.
On this, the tribunal judgment stated: “The mere fact that an activity may be beneficial to its participants is not sufficient for it to be exempt from VAT . . . We note that there is an exemption from VAT for fees to enter certain sporting and physical recreational competitions. Even if chess amounted to a sport or physical recreation (which we doubt), the exemption is only available if the competition is organised by an ‘eligible body’. As Mr Basman does not meet the requirements for an eligible body, the exemption is not available.”
It concluded: “Given that Mr Basman did not dispute the turnover figures upon which HMRC relied in using their best judgment, it must follow that Mr Basman’s appeal can have no reasonable prospects of success.” After a number of appeals, Basman was declared bankrupt in August last year.
Sadly, Basman’s only asset is a 50% share in a property that his ex-wife still lives in and will now be forced to leave after being told this month that the official receiver intends to seize it.
January 22, 2017
The following is from The Sunday Times. It is on subscription and probably most readers will not be able to link to it.
http://www.thetimes.co.uk/edition/mo...bill-p868nr98c
I will give the facts of the case but omit the conclusions of the court and the tax advice to others in the same situation.
_____
Chess master has no defence against £300,000 VAT bill
Michael Basman’s ruin after years spent turning pupils on to the game is a warning to us all
Nina Montagu-Smith
January 22 2017
The Sunday Times
Michael Basman, an international chess master, ran a national schools’ chess tournament for 20 years but was forced into bankruptcy after a lengthy battle with the taxman
Death and taxes are the two things on which we can absolutely rely, so attempting to put either on hold indefinitely is never going to work.
Sadly, the international chess master Michael Basman, 70, has discovered to his cost how true this is when it comes to dealing with the taxman.
He is a well-known figure in chess circles — he tied for first place in the 1973 British Chess Championships but lost the play-off, and in 2013 was presented with a special award for services to chess by the World Chess Federation at 11 Downing Street.
Basman does not just play a superb game of chess — he has also worked tirelessly to introduce the game to children in Britain through his own annual tournament. Introduced in 1996, the UK Chess Challenge ran for 20 years and, at its height, attracted about 70,000 entrants from 2,000 schools.
However, for Basman its success has been terribly overshadowed. Last year he was forced into bankruptcy and made to sell off the tournament, all because he failed to charge VAT on the tickets that schools and parents bought to take part each year.
He never made a profit from it and all revenues were declared for income tax to HM Revenue & Customs (HMRC) on his annual tax return. When the taxman came knocking for VAT from the ticket sales, though, he did what many in his position might feel tempted to do, but should not: he hoped it would all just go away.
Now he is bankrupt and owes about £300,000 to HMRC, although he has managed to reduce this bill by £40,000 through the forced sale of the tournament. Worst of all, his ex-wife, who is elderly and unwell, faces eviction from her home, which Basman co-owns, in Chessington, southwest London.
“HMRC’s main argument is that I should have charged VAT on the tickets to the tournament and paid it to HMRC, but we had 50,000 kids a year on average taking part and I just didn’t have the time — the admin is quite considerable,” Basman said. “Also, I do object. Adding 20% to the cost of tickets makes it even harder for poorer kids to take part.”
How did the tournament work?
Each year, the competition took place in four stages. The first was held within individual schools, which each paid Basman £40 to enter up to 30 children. Those that got through to the next stage went on to compete at county level, usually hosted in a school, where tickets were £15 per child. At the next two stages — northern and southern regionals, and the overall national final — tickets were, again, £15 per child. The majority of this revenue went into a total prize fund of £20,000. Prizes ranged from about £500 at the lower levels, to £6,000 at the final.
On each ticket, he should have charged the standard rate of VAT, currently 20%.
Some years ago, HMRC suggested Basman set up as a registered charity, but this again seemed too onerous and time-consuming, even though it would have saved him the bother of charging VAT. After years of discussions, the case came to a tribunal in September 2013, and Basman was ordered to pay £300,000 in tax.
The tribunal concluded that Basman focused on the “unfairness of the VAT system and his view that complying with his VAT obligations is equivalent to forced labour and slavery. He argues that the forced completion of these obligations is in contravention of the European Convention on Human Rights . . . We do not consider that complying with normal tax record-keeping, accounting and filing obligations amounts to slavery or forced labour.”
Basman also argued that learning and playing chess had beneficial effects and so should not be subject to VAT.
On this, the tribunal judgment stated: “The mere fact that an activity may be beneficial to its participants is not sufficient for it to be exempt from VAT . . . We note that there is an exemption from VAT for fees to enter certain sporting and physical recreational competitions. Even if chess amounted to a sport or physical recreation (which we doubt), the exemption is only available if the competition is organised by an ‘eligible body’. As Mr Basman does not meet the requirements for an eligible body, the exemption is not available.”
It concluded: “Given that Mr Basman did not dispute the turnover figures upon which HMRC relied in using their best judgment, it must follow that Mr Basman’s appeal can have no reasonable prospects of success.” After a number of appeals, Basman was declared bankrupt in August last year.
Sadly, Basman’s only asset is a 50% share in a property that his ex-wife still lives in and will now be forced to leave after being told this month that the official receiver intends to seize it.
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