Business secretary Vince Cable had to pay around £15,000 in back taxes and a £500 penalty after failing to register and paying VAT due on freelance income during 2009-10, according to an investigation by The Sun.
In addition to his £65,738 salary as an MP, Cable earned £50,998 in freelance earnings in 2008-09 - below the £73,000 VAT registration threshold. But in 2009-10 his income for media work and speaking engagements shot up to more than six figures. From the register of MPs’ interests, The Sun estimated he earned another £127,000-£154,000 from outside work, including an appearance on ‘Strictly Come Dancing’, for which he earned a £10,000 fee that he gave to charity.
But he neglected to register for VAT and did not account for the tax on this income and related expenditures.
The oversight came to light when the minister’s accountants, Myrus Smith, prepared his 2009-10 Self Assessment tax return.
“When it became clear Mr Cable's earnings had breached the level at which VAT was payable, an offer to settle immediately and in full was made to HMRC and this was duly accepted,” the firm told The Sun.
“The matter was dealt with within a month of the Revenue being informed in the first instance and is now closed.”
The failure to register and pay VAT left the minister open to a potential penalty of 5% of the tax due, plus a failure to notify penalty. But agreeing a settlement of around £15,000 plus a £500 penalty - reduced by 50% for the unprompted disclosure and full co-operation.
Tim Subhan, a tax partner at Sutton-based Myrus Smith, was constrained by client confidentiality, but told AccountingWEB that the penalty was reduced as normal for full dislosure. The newspaper reports are worded to suggest that Cable earned“up to £192,000” as a freelance, but the sums quoted are inaccurate, his accountant said.
His advisers may have minimised the financial damage for their client, but as The Sun made very clear, the political fall-out for a minister who has pushed for a crackdown on tax evasion will be devastating.
In its leader comment on the story, The Sun thundered: “Since he's so hopeless at managing his own affairs, what on earth is this buffoon doing in the government?”
About John Stokdyk
John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.