Actor Rupert Grint, famed for his role in the Harry Potter films, has lost in a First Tier Tribunal (FTT) against HMRC for a £1m tax refund, after a dispute over whether a tax return should be considered as an annual account
The Harry Potter film star appealed against amendments made to his tax returns for the years ended 2010 and 2011 in closure notices issued by HMRC but his appeal was dismissed in Rupert Grint v HMRC [2016] UKFTT 0537(TC).
Grint made around £24m from playing Ron Weasley in the hugely popular franchise and would have saved around £1m if his appeal would have been successful.
In 2009/10 Grint decided on advice from his accountant, Dan Clay, to change his accounting date to 5 April and so bring into account in that tax year income earned in the 20 month period 1 August 2008 to 5 April 2010. In other words, he intended to have a 20 month, rather than 12 month, basis period in 09/10.
Around this time Grint was 21 years old and the seventh film ‘Harry Potter and the Deathly Hallows – Part 1’ was being released.
HMRC opened an enquiry into the tax return on 12 January 2012.
The ruling said: ‘Having the change in accounting date recognised would have the effect for the appellant, as I have said, that 20 months’ income would fall to be taxed in 2009/10.’
By changing the year end, Grint benefited as the returns were submitted before the introduction of the 50% tax rate in 2010-11. Changing the year end was not in dispute.
‘At first glance, it might not seem advantageous to a taxpayer to do this but the quid quo pro of bringing forward to 2009/10 the liability to the tax on this eight months’ worth of income was that this took that income out of tax year 2010/11.’, stated the FTT.
Judge Mosedale said in the ruling: ‘However, this is all irrelevant because even if I am wrong, and the tax return (aka Return Accounts) would be seen as accounts by the accountancy profession, I find as a matter of law that they are not the accounts within the meaning of the legislation at issue in this case.’
HMRC point out that s 8 Tax Management Act (TMA) makes a distinction between ‘accounts’ and a tax return suggesting that they could not be one and the same thing.
Grint appealed this by saying that that was true in the past when HMRC required less information on the tax return itself but expected taxpayers to file a copy of their accounts with the tax return.
Now HMRC expect all the information on the accounts to be recorded in the tax return and do not permit the filing of accounts with the tax return (at least if filed electronically).
Evidence was heard from Grint himself and accountant Dan Clay of Clay & Associates. Grint was 12 years old when he first appeared in the film franchise and had admitted that his knowledge of financial affairs was limited. The judge said in her ruling that he had made it clear ‘that he placed his faith in his father and accountants to deal with his financial affairs.’
