You may have seen recent press articles that the Inland Revenue (Revenue) has been raiding Lap – dance clubs nationwide targeting both the business and the dancers. The concern is that some dancers are not declaring their income from the club.
All businesses using these dancers need to decide if the dancer is an employee of their business or self-employed. If the club has treated the dancers as self-employed and the Revenue believes they were really employees then the club will receive the tax bill (including Tax, National Insurance (NIC), interest and penalties) not the dancers!
Many businesses argue that if they have obtained a signed declaration that the dancer agrees to be self-employed, the Revenue can easily obtain any Tax/NIC from the dancer. This is a common mistake many people make. You need to look at the working practice of the dancer to confirm how they should be treated. The Revenue use a questionnaire with over 80 questions to decide if the dancer is an employee or self-employed.
When the Revenue inspects the business records they will obtain details of all the dancers and then check to confirm they have declared their income. If they haven’t, the Revenue will then calculate the amount of Tax and National Insurance due for the last 6 years and send a tax bill to the dancer. As you can imagine this could be up to £100,000! (The Revenue hardly ever underestimates the income). If the dancer is faced with a large tax bill, my experience is that the dancer may "disappear" and start working at another club. (Sometimes, the Revenue will then send the dancer’s tax bill to the club and ask the club to pay). So, although self-employed dancers may not be a concern for you, if the dancers leave, it may have an affect on your business.
Now that I work for myself, people ask how they can avoid these problems. Below is a checklist:
If you or the dancers need further help, then please contact me (e-mail) urgently before the Revenue calls to inspect the club and check the dancers.
Dancers
Most people believe that if you are in a cash business that it is very difficult for the Revenue to catch you out on your accounts. However, cash businesses are the easiest to investigate as it is very difficult to agree your money at the end of the day, week or year. In the short term not declaring your income may seem a good idea, but a 3-4 hour interview with a Tax Inspector who asks how much cash you spent on a wet Tuesday in February 1998 may not be so easy to deal with!
The Revenue can go back 6 years at least, so your tax bill could be over £25,000. The Revenue will consider interest and penalties which will bring the total up to nearly £40,000!
If you can't pay, the Revenue could look at any assets you have, house, flat, car etc. to see if these can be sold to pay the bill. A sobering thought. Ignoring the Revenue is not a good idea.
There are basic Self-Assessment details on the (SA Work page which may help. If you haven't declared any income and require advice or assistance then please e-mail me or contact me on 0121 747 2474 or mobile 07876 667903.