Tax That Pole

I see that Harriet Harman, the UK’s Deputy Prime Minister, is trying to curry favour with the female voters before the next election. She’s proposing that VAT levied on expenditure at the UK’s lap dancing clubs should not be reclaimable. Whether this is to discourage red-blooded men from frequenting such clubs or whether it’s just another way of scraping together even more tax, I know not, but I suspect if and when it comes to a vote in the House of Commons, there will be more squirming than a stripper on a greasy pole!

For those of you who are unable to grasp the issue (from dear Harriet’s perspective), the theory is that most expenditure in these establishments is expensed and companies then reclaim the VAT back from the government when they process their employee’s expense claims. In addition, if the expense is for ‘entertaining’ clients, the whole bill for the outing can be offset against the company’s corporate tax bill - a sort of government lap-dancing subsidy if you like.

And it’s not a small problem if you’re the tax man. The owner of one club chain said that during the week up to 75 per cent of his clients were there on business. “It is an expensive night out at a couple of thousand pounds a time,” he said. “You couldn’t afford it if it wasn’t on expenses.” How true!

Lap-dancing clubs have sprung up all over Britain and have doubled in number over the last four years after legal changes in 2003 made it easier to get a licence. A loophole in the Licensing Act allowed the clubs to be associated with the leisure industry rather than the sex industry but after a vociferous campaign from women’s groups and MPs who were inundated with complaints from constituents, that loophole has been closed and clubs must be licensed as sexual-encounter establishments.

Research by the Fawcett Society pressure group found that 41 per cent of the clubs advertise directly to companies, and in London, 86 per cent of clubs admitted to providing “discreet receipts” to clients allowing them to pass the night out off as drinks and dinner, rather than an evening at a lapdancing club.

Two stories about my own very limited experience of these types of clubs:

My director was leaving BT and as his deputy, I was tasked with organizing his ‘leaving do’. He specifically asked for it to start off in a lap-dancing bar. The fact that he had also invited the division’s HR Director, a woman, didn’t seem to bother him – or me for that matter. I mentioned to her what we had planned and she was fine, that is until we got to the bar where, after the first ‘dance’, she turned to me and said, ‘Tom – this is most definitely going onto your HR record’. Whether it did or not, I don’t know but my protestations that it wasn’t my idea, didn’t seem to make any difference!

Another of my directors in BT just wanted a good night out. Again, I was chosen to get the ‘logistics’ right and off we went (four of us) in a cab. Thereafter, it was a succession of clubs, bars and pubs, spending several hundreds of pounds in the process – all tax deductible of course! At about 3am, a couple of the party were flagging and an all-night breakfast in a café just off Regent Street seemed like a good idea. As we ate our bacon, black-pudding, eggs and assorted other fried delights, a rather glamorous girl at the next table said, ‘Tom – is that you?’ I recognized her and replied, ‘Hi Sabrina – how’s things – business good?’

My colleagues, in particular my director, were impressed that at 3am in London, I should be recognized and greeted by a rather gorgeous female. When they asked me to introduce her, I said, ‘guys – this is Sabrina – she’s a lap-dancer at Brown’s.’

My office reputation went up by leaps and bounds after that – but not with HR!