The Actor Earned £24m From Harry Potter Films But Could Receive A Large Reimbursement
Tax experts from Irwin Mitchell Private Wealth say a Harry Potter star’s case against HMRC for a £1m tax refund shows just how delicate proving intention for account period changes can be.
Actor Rupert Grint, who plays character Ron Weasley, claims HMRC officials blocked attempts to protect his earnings from a new tax rate over accounts created for him in 2010, during his £24m career for film franchise Harry Potter.
Rupert Grint is contesting a decision made by tax inspectors to permit him from having an accounting period shorter than the usual 12 months, as his accounts ran between 31 July 2009 and 5 April 2010. On 6 April 2010, the new tax rate of a 50% top rate came into force.
The new rate was introduced in the final month of Labour government following the banking crisis, yet was abolished two years later by conservative George Osborne.
Lawyers on behalf of Grint told a tax tribunal sitting in the high court in London that there was nothing wrong with changing the accounting date and reinforced that this date was accepted by HMRC.
However, after an unrelated accounting document was called in for a routine VAT inspection showing a different date, tax inspectors rejected the date change.
Grint’s lawyers argued that this recalled document was an informal summary of financial information and never intended to be established as an official set of accounts.
The actor who first appeared in Harry Potter at the age of 12, said his knowledge of his financial affairs was “limited” and left his tax returns to his father, Nigel Grint, and his accountant, Dan Clay.
HMRC officials cannot comment on the case. The hearing closes on 29 June.
Andrew Watters, tax partner at Irwin Mitchell Private Wealth, said:
Expert Opinion“Rupert Grint’s tax refund dispute highlights how tricky it can be when deciding what is the ‘correct’ amount of tax.
“If you are trading, and presumably Mr Grint is trading as an actor, you can decide what your accounting period should be. You can also change it.
“Mr Grint’s accountant appears to have changed his accounting period to end before the new 50% top rate of tax was introduced, saving a lot of tax.
“As changing an accounting period is legal, HMRC cannot retain the missing tax money by arguing that the action is evidence of the ‘dark arts’ of accounting.
“They seem to be arguing that the accounting period initially envisaged would have taken Mr Grint into the 50% tax rate and tax is due on the basis of the original accounting period envisaged. Mr Grint is arguing that while his team might have previously considered a longer accounting period, he is entitled to change his mind.”
Andrew Watters - Partner