Back in 1978, the cartoonist Jeff MacNelly won a Pulitzer Prize for a cartoon lampooning the Internal Revenue Service’s Form 1040. It was large and sprawling, and depicted the lunacies of the US tax system. Today, we need a similar graphic effort at holding the tax system to scorn.
All this starts in a small, quiet gallery off Piccadilly in the heart of London. It is crammed with toy soldiers, busts of famous figures, Sir Winston Churchill glowering, paintings of great military figures from the romantic past. There is even a remarkably affordable framed photograph of onetime Prime Minister John Major.
The gallery comes under, and no one is arguing about this, the regulatory umbrella of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. No problem. Money laundering is a scourge, particularly in London over the past few decades. But here in the tiny gallery space of The Armoury of St James’s, manager James Rawlins explains his fate.
The grand edifice for battling money laundering was fining people for a petty regulatory mistake
The gallery comes into the regulatory net because under the rules it has, fair enough, to report the details of any sale worth more than £10,000. ‘On day one we had signed up,’ says Rawlins.
All the paperwork
Across the past five years the gallery had three sales that qualified, and it reported them. It had all the relevant paperwork. It had even certified that to the best of the gallery’s knowledge it had not passed anyone the means of creating a nuclear device and had carried out a risk assessment on that issue. There were 15 pages of regulations on that.
But when HMRC came to visit, the gallery finished up with a fine of £5,000. ‘We thought they were coming to help us,’ says Rawlins, the cry of the small business down the ages. ‘They spent the whole day with us. They had a strange idea of what retail was all about. And after a few hours I was thinking: “What do they want?”’
There is a crying need for someone to shine a light on the petty lunacies so that they can be removed
In the end it all came down to a classic small-business failing, that of being small. ‘A colleague did all the paperwork and it should have been me,’ says Rawlins. They had put the wrong name in the wrong box. The grand edifice for battling the evils of money laundering was fining people not for money laundering but for a petty regulatory mistake. A sensible regulator would have issued a gruff admonition and left it at that. But that is not the way of the bureaucrat.
Unfairness and stupidity
As I left the fine collection of bristling soldiery from the past, I remembered that I knew another gallery owner in the area. He is an amiable, witty and friendly soul. I popped in to see him and asked if he had ever fallen foul of these regulations. No, he certainly had not. But the air turned a very uncharacteristic blue as he ranted at the lunacies, unfairness and stupidity, and unintended consequences, that the regulatory approach of HMRC had created.
It is another case of legislation with a perfectly fair and sensible, and just and praiseworthy, objective finishing up doing little beyond creating a myriad of small fines. There is an HMRC list of them online that stretches far into the horizon. There is a crying need for someone – the Office of Tax Simplification, binned by Liz Truss’s administration in 2023, comes to mind – to shine a light on the petty lunacies so that they can be removed.
Jeff MacNelly is sadly long dead. One of the questions on his gloriously scornful cartoon tax form was how many talking chickens the taxpayer owned and whether any of them played the oboe.
