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.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.