by Rebecca Burn-Callander - Friday, 25th April 2008 - - Business comment

It’s a shame they’re not fighting it out Blade-style. Can you imagine it? Snipes, clad top-to-toe in PVC, delivers a high kick that sends Taxman’s glasses shattering to the floor. Taxman retaliates with a tsunami of paper, plunging a pen in his eye.

If only. Instead, the case was fought out in the US courts.

Poor old Snipes was caught out for failing to file his tax returns between 1999 and 2004. The judge sentenced him to three years in prison, the harshest penalty available for this kind of misdemeanor. Admittedly, we’re talking some $20m in undeclared tax, but this is Wesley Snipes, the Wesley Snipes. Surely the man who brought us White Men Can’t Jump and Demolition Man deserves some leniency?

Anyhoo. We, at Real Business, thought there must be a lesson to be learnt from the Snipester (or “Fluffy” to those closest to him). We caught up with Ravi Gehlot, founder of London-based OneOffice, to find out about his run-in with HM Customs and Excise a few years back.

“I was 18 and I was working as a club promoter in Ayia Napa,” he explains. “ I didn’t fill out my VAT return and the tax people assumed that I owed them money.”

“I’d already made my first million and was busy organising my next party,” he continues. “I didn’t even know we were in trouble because they were sending correspondence to an old address. Next thing I knew, the VAT people had put my company into administration.”

Quelle horreur!

“They were only after a few thousand pounds,” says Gehlot. “But they took me to the High Court. I self-represented and we didn’t actually owe them any money, so the order was rescinded.”

But not before the Daily Mirror threatened to run an expose entitled, “Teenage Millionaire Made Bankrupt”

“They sent some trainee to interview me. But he showed me the document they were going to publish, so I knew it was a stitch-up. He got in trouble with the paper, and I went straight to my solicitor. They never filed the piece!”

Mr Snipes wasn’t quite so lucky. Even though fellow Hollywood heavyweights Denzel Washington and Woody Harrelson sent pleading letters to the judge, he’s still looking at hard time in the slammer.

Mike Truman, editor of Taxation magazine, has some advice for small businesses wishing to avoid the same fate.

“The obvious answer is to file your return on-time and correctly,” he chuckles. “But it’s always worth remembering that the Revenue is more likely show leniency if you own up. If you admit you’re at fault before they catch you, you’ll face reduced penalties. There’ll still be a fine, but you’ll get credit for your honesty.”

Don’t forget that Snipes denied any wrongdoing right up until the court date itself.

Truman continues, “Penalties congregate around 40-45 per cent of the tax owed. But that’s changing. Penalties next year will be up to 100 per cent. They’ll remain low if you come forward, however. If you hide your income and you persist in claiming that you’ve nothing to pay, like Snipes did, you’d expect a 100 per cent penalty. Especially if it’s a repeat offence.”

One final warning from MR Truman.

“Don’t forget the classic case where an individual had a big investigation launched against him by the taxman. He finally agreed to pay a sum of money for the offshore accounts he’d been hiding. But when he wrote out the cheque, an eagle eyed detective spotted that it was drawn from an unknown account – yet another nest egg he hadn’t disclosed.”

You’ve been warned…

Picture source