George Bull

Written by: George Bull, Andrew Hubbard and Frank Shepherd

George Bull

Senior Tax Partner

Why The Beatles' legacy lives on… in tax

This week marks the 50th anniversary of the last public performance of The Beatles – the band whose legacy lives on, not least in the world of tax.

Many will know the HMRC karaoke favourite The Taxman ('There's one for you, nineteen for me...'), George Harrison's furious response to being hit with a super-tax by the Harold Wilson Government.

Less well-known is the ‘Beatles clause’ - a targeted anti-avoidance rule aimed at preventing entertainers from converting highly taxed income to lower-tax capital receipts - a measure which remains on the Statute Book to this day.

Yet half a century after the band left the stage, the tax issues they raised are as relevant as ever amid a growing international clamour for new super-taxes. 

The recent suggestion from one Congresswoman that the US Government should introduce a 70 per cent income tax rate for those earning over $10m has generated considerable headlines on the other side of the pond.

Meanwhile in the UK, many high earners worry about the prospects of a return to punitive taxes under a future Labour Government. The party’s latest manifesto promised tax hikes for the top 5 per cent of earners, new wealth taxes and a new land value tax to boot.

Within this context, we were very interested to read the inaugural Sunday Times list of the top UK taxpayers. 

Some commentators have quite rightly questioned how the Sunday Times were able to compile this list, given the confidential nature of individuals' tax affairs. How do we know how much tax someone has paid? True transparency would only be possible when all individuals are required to make their tax returns public. While that’s a bridge too far for most people, perhaps there might be a demand for a personal version of the voluntary Fair Tax Mark for individuals wishing to demonstrate how much tax they pay on what income and gains. 

But health warnings aside, the publication of the list does point to a change in the public mood. 

While at one time it may have been socially acceptable to be seen to be diddling the taxman, paying high rates of tax is now seen as a badge of honour with top taxpayers being feted for their contributions to the Exchequer. 

And perhaps we shouldn’t scoff. The fact remains that there are individuals who pay eye-watering sums in tax every year. 

The latest data from HMRC suggests that the top 1 per cent of earners contribute 28 per cent of all income taxes to the nation's coffers, while the top five per cent contribute almost half (48 per cent).

And while a super-tax might sound like an appealing idea in principle to address perceived unfairness in the system, do we really want to get back to the days of Harold Wilson when the top income tax rate was 83 per cent, and combined with a 15 per cent surcharge on unearned income, the marginal rate reached a staggering 98 per cent?

This wasn’t a fair progressive system. It was outright theft. 

As George Harrison so neatly put it at the time:

‘I'm the taxman, yeah, I'm the taxman
And you're working for no-one but me.’

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