Michael Basman and the tax bill

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  • Steve Karpik
    replied
    Re: Michael Basman and the tax bill

    Originally posted by David Ottosen View Post
    Government intervention, theoretically helpful, once again crushes individual spirit. If Basman knew then what he knows now, do you think he would still have run the tournaments? Or just said too much work, forget it.
    He could have just charged VAT. A bit of a pain but not the end of the world. He was already reporting his income anyway so the accounting it all there.

    I don't, however, blame him for getting trapped like this. Sometimes even when you're trying to follow the rules it isn't always easy to do because they aren't very clear.

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  • Steve Karpik
    replied
    Re: Michael Basman and the tax bill

    If you can't claim ITCs, it would be better not being a regular business rather than an non-profit. It would depend on how the numbers shake out though.
    Last edited by Steve Karpik; Monday, 23rd January, 2017, 06:13 PM.

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  • Wayne Komer
    replied
    Re: Michael Basman and the tax bill

    Michael Basman and the tax bill

    January 23, 2017

    Some readers might want to know more of the human side of this. They can see almost 40 pages of opinion at the EC Forum in the section on Junior Chess (Save the UKCC petition):

    http://www.ecforum.org.uk/viewtopic....8610&start=555

    There is this letter from Mike Basman there:

    “Dear colleagues, As you know I was bankrupted and the Chess Challenge sold off at a profit of £40,000 going to HMRC. But HMRC wants now the sell the house, occupied by my ex-wife, to realise half the price, which will mean that she is evicted even though she is elderly and quite unwell. I do not believe that she should suffer because of the mistakes of another person, especially as she has no financial involvement with me. Accordingly, I am starting a campaign to raise awareness of this situation

    WESTMINSTER CHESS CHALLENGE

    Each Wednesday (starting on 25th January), from 12 noon to 5 pm, I will be outside the Houses of Parliament with a chess board and will challenge all comers. It will be called the Westminster Chess Challenge and each of my opponents will receive a signed certificate plus the record of their game against the International Chess Master at this historic site of British liberties. I will be challenging members of the House of Lords and House of Commons Chess Clubs to come out and face me and I will play them blindfolded.

    I am hoping that members of the chess community and my friends among the chess masters and grandmasters will also come to the event and take up the challenge. Essentially it is a matter of fairness. I disagreed strongly with the behaviour of HMRC, but even more so, I would not like another person to suffer for a dispute in with which they had no connection. Thank you. Mike Basman”
    ________

    One note: on the above site there is a link to our ChessTalk thread. I fear that anyone clicking on their link and then, subsequently on ours, will get caught in an infinite loop from which they may not escape. Forewarned is forearmed.

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  • David Ottosen
    replied
    Re: Michael Basman and the tax bill

    Government intervention, theoretically helpful, once again crushes individual spirit. If Basman knew then what he knows now, do you think he would still have run the tournaments? Or just said too much work, forget it.

    Leave a comment:


  • Vlad Drkulec
    replied
    Re: Michael Basman and the tax bill

    Originally posted by Steve Karpik View Post
    The threshold is actually lower - $30,000 in a year. For more information, see:

    http://www.cra-arc.gc.ca/tx/bsnss/tp.../menu-eng.html
    The threshold is higher for a non-profit, $50,000. There are also exemptions for activities directed largely at youth below a certain age (14, I believe) according to government websites.
    Last edited by Vlad Drkulec; Monday, 23rd January, 2017, 12:48 PM.

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  • Egidijus Zeromskis
    replied
    Re: Michael Basman and the tax bill

    Don't forget this part:
    "If you choose not to register, you do not charge the GST/HST (other than on certain taxable supplies of real property), and you cannot claim ITCs."

    Input tax credit (ITC) – means a credit that GST/HST registrants can generally claim to recover the GST/HST paid or payable for property or services they acquired, imported into Canada, or brought into a participating province for consumption, use, or supply in the course of their commercial activities.

    Leave a comment:


  • Steve Karpik
    replied
    Re: Michael Basman and the tax bill

    Roger, you are indeed correct although I think the higher limit only applies to nonprofits. I had not realized that nonprofits follow different rules than other organizations. The limit for nonprofits is $50,000. One would, of course, have to be very careful about one's non-profit status. As you wisely advise, the advice of a professional should be sought on such issues.

    Here's a link to the CRA document on HST and non-profits:

    http://www.cra-arc.gc.ca/E/pub/gp/rc4081/rc4081-e.html

    Leave a comment:


  • Roger Patterson
    replied
    Re: Michael Basman and the tax bill

    Originally posted by Steve Karpik View Post
    The threshold is actually lower - $30,000 in a year. For more information, see:

    http://www.cra-arc.gc.ca/tx/bsnss/tp.../menu-eng.html
    While I am not an expert on this, the last time I looked at it, there is a different threshold for sporting competitions (from memory, twice as high or $60,000)

    You would have to of course, review the precise wording of the law with someone who's an expert before relying on this.

    Later edit: There is also a different limit for non profits $50,000 which is probably the basis of Larry's number
    Last edited by Roger Patterson; Monday, 23rd January, 2017, 03:13 AM.

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  • Steve Karpik
    replied
    Re: Michael Basman and the tax bill

    Originally posted by Larry Bevand View Post
    The Chess'n Math Association, remits HST on entry fees we charge at tournaments we organize in Ontario and in Quebec we pay GST and PST. I believe the law in Canada is that if you have revenues over $50,000 in a year, then this is required. So when we advertise an entry fee for an event, it includes the appropriate taxes.
    The threshold is actually lower - $30,000 in a year. For more information, see:

    http://www.cra-arc.gc.ca/tx/bsnss/tp.../menu-eng.html

    Leave a comment:


  • Larry Bevand
    replied
    Re: Michael Basman and the tax bill

    The Chess'n Math Association, remits HST on entry fees we charge at tournaments we organize in Ontario and in Quebec we pay GST and PST. I believe the law in Canada is that if you have revenues over $50,000 in a year, then this is required. So when we advertise an entry fee for an event, it includes the appropriate taxes.

    Leave a comment:


  • Wayne Komer
    started a topic Michael Basman and the tax bill

    Michael Basman and the tax bill

    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.
    _____

    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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