Oh! Darling: Harry Potter star Rupert Grint owes taxman £1.8m thanks to Beatles clause

Harry Potter star Rupert Grint’s appeal against HMRC imposing a £1.8m tax bill on him was dismissed this week, after a Tribunal upheld a Beatles clause against the actor’s tax affairs.

HMRC sought to impose over £1.8m of tax on Grint for the tax year 2011/12 under “the sales of occupation income provisions” contained in (ss) 773 to 789 of the Income Tax Act 2007.

Grint’s late father, Nigel manages his business affairs.

The actor, who started filming the first Harry Potter film at age of 13 depicting Ron Weasley , was paid for the Harry Potter movies but was entitled to further payments that had his name attached.

Those payments were over £8.5m, made up of over £4m as income from contracts and £4.5m for rights and goodwill.

On 1 August 2011, Clay 10 Limited was incorporated, with Grint as the sole shareholder and his father as the company’s sole director.

The rights, together with what was described as business information, records relating to the acting and goodwill attached to his name were transferred to Clay 10 on 13 October 2011.

For the tax year 2011/12 the actor accounted to HMRC for the sum of over £4m as income and for £4.5m as a capital gain, which he claimed entrepreneurs’ relief and paid capital gains tax at 10 per cent.

Despite that, in January 2014, HMRC opened an enquiry into his tax return for the tax year 2011/2012, and in 2019 the agency issued a closure notice.

In the computation of income tax due in the closure notice, credit was given for the near £450,000 of capital gains tax paid by Grint.

As tax expert Dan Neidle, founder of Tax Policy Associates pointed out, “HMRC applied the Beatles clause” to his case.

This targeted anti-avoidance rule aimed at preventing entertainers from converting highly taxed income to lower-tax capital receipts.

It was named after the famous Liverpool band after it set up a company and sold their music rights to it to avoid paying income tax in favour of capital gains.

As Neidle noted, “60 years later, the Beatles clause is a historical relic. But, as Rupert Grint just discovered, it’s still around – now in s773 of the Income Tax Act 2007.”

The First-Tier Tribunal dismissed Grint’s appeal, ruling in favour of HMRC, noting “to hold that the question of whether income tax is due on the ‘capital sum’ can be examined as widely as might be necessary to determine if that is the case does not lead to a roving enquiry and/or result in any unfairness to Grint”.