The taxman vs the prostitutes

Prostitutes have to pay tax on their earnings, so why isn't their business entitled to same protections as everyone else?

This week’s news regarding Donna Asutaits, who was jailed after earning more than £300,000 in two years and failing to declare tax, is a reminder that prostitution is taxable. Well, more taxable than Goldman Sachs or Vodafone, at least.

The story of how the trade came onto HM Revenue and Customs’ somewhat hit-and-miss radar gives an interesting little insight into its relationship with the state. I decided to talk to a man who could tell me more. While he doesn’t want to give his name, he goes by the online moniker of Jolyon K Jolyon (he’s a fan of The Forsyte Saga), and he’s now a retiree, living in the West Country.

Some years ago, he was running an accountancy practice. He found himself acting for a lady who told him she was a dental technician, but the more he looked into her records, the less they stacked up. Why, for example, was she always paid in cash? He held a meeting with her, and she admitted she was a prostitute. Undaunted, he decided to continue working for her, and soon she introduced him to more women working in the same industry.

Jolyon is rather knowledgeable on the history of this issue. He tells me it was resolved back in the 1980s, when the famous madam Lindi St Clair underwent a series of investigations after she refused a discount to a cross-dressing tax inspector. Jolyon’s website tells the story in full, but a précis runs thus. 

After the first investigation Lindi appointed a proper firm of Certified Accountants to act for her, and they recommended forming a limited company as a way of saving tax. The following year the Attorney General successfully applied to the High Court for the registration to be quashed. A series of legal battles were then waged between St Clair and the Revenue, in which she drew attention to what she felt was the hypocrisy of the state.

You could argue she had a point. During one police raid, the Vice Squad discovered Lindi sitting quietly in the lounge, with a vicar in a gas mask handcuffed to a wall, a straitjacketed member of the House of Lords shut up in a cupboard and an MP chained up to a dog kennel in the garden. At one point she appeared before the Appeal Court judges dressed in fish net tights, a low-cut shiny PVC dress, and a steel-studded belt from which handcuffs dangled: “I felt that if I were to be taxed as a tart, I would appear as one.”

Lindi’s barrister argued that although prostitution is lawful it can’t be considered a trade because a prostitute cannot do things such as advertise, go into partnership, form a limited company, employ people, rent premises or sue for debts. She lost the case and her subsequent appeal at the Court of Appeal. The judges said: "[Prostitution] consists in the supply of services for reward on a commercial basis. Although the bargains made between the prostitute and her clients are unenforceable as being contra bonos mores neither the bargains made nor the services supplied are illegal in the sense of being prohibited…" In English – what you’re doing isn’t illegal even if everything surrounding it is, so pay up.

The case is cited by HMRC as the judgement that confirms prostitution is taxable. “But even today, there’s a huge misconception about what the law is,” says Jolyon. He feels that the big problem lies with the legislation on brothel keeping. This – unlike prostitution, is considered a crime. Common sense dictates two fairly simple things: one, prostitution won’t go away any time soon (something about that whole "oldest profession" thing), and two; the women doing it are safer working indoors with a maid, rather than working on the street.

There’s neither rhyme nor reason to this law, besides the rule that for every outraged Daily Mail headline there’s an equally cowardly political reaction. This could be seen in action a few years ago, when Labour announced it was looking into allowing small groups of women to work together, the Mail newsdesk editors had to be mopped down with a moist towelette, and the idea was quietly junked.

The common argument against is that there’s an epidemic of trafficking which requires the police to clamp down on brothels as and when they choose. The problem is, the last time an MP tried to cite data to support it, it turned out they were drawing on statistics drawn up by that well-respected institute of independent research, the Daily Mirror (as a side note, it's never a good idea to cite this as a source in Parliament and then go on Newsnight, on the off-chance Jeremy Paxman rips you a new one - see below).

Jolyon says: "The women for whom I worked simply made a hard decision and did the work with their eyes open. If people are paying taxes on their business they should be entitled to the same protection as anyone else. There are already laws to protect from trafficking and slave labour – what makes the sex industry different?”

I tell Jolyon I know of one case where the officers who closed down a brothel had, for a period prior to the closure, been making use of its services – and have described another case at length, where the police’s behaviour could best be seen as reprehensible. It’s an inconvenient truth that the cops get a share of the frozen assets when they close a brothel down.

Jolyon tells me the authorities make it impossible for brothels to function above ground: “Accountants are part of the regulated sector – they’re bound by money laundering regulations, so if they come across a brothel they’re obliged to tell the Serious Organised Crime Agency, and can’t tell the client that that’s what they’ve done. Similarly, no accountant wants to take on a client which at any time could be closed down under the Proceeds of Crime Act. That’s why I only worked for women working on their own.”

As I wrote last month, the authorities have been quietly trying to “clean up” the Olympic boroughs. In that case it was a police-lead exercise – but Jolyon tells me about another operation I hadn’t noticed. According to a press release Operation Vermont, was “a multi-agency exercise which ran for six weeks in May and June. During this time 31 businesses were suspected to be underpaying workers, or were considered a significant risk requiring further HMRC investigation.”

Jolyon concludes: “It’s interesting that they targeted things like fast food outlets and mini cab offices, rather than brothels – you’d think they’d be the first port of call, if the industry is as sordid as they make out.” Donna Asutaits claimed in her defence that she was simply naive in not paying tax. One might raise an eyebrow at the idea she could earn so much money and assume it wasn’t taxable. But given the long-standing stigma that has emanated from government on this issue, she might well have been telling the truth.

 

A Soho prostitute waits for some custom. Photograph: Getty Images

Alan White's work has appeared in the Observer, Times, Private Eye, The National and the TLS. As John Heale, he is the author of One Blood: Inside Britain's Gang Culture.

Photo: Getty Images/AFP
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Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.