Oh! My Precious

One fine day composer John Casken arose to discover that he had won the first Britten Award for composition worth £10,000. He won the money for Golem, a work for eight singers accompanied by 11 instrumentalists and tape recordings, which was submitted to the competition by Casken’s publishers, Schott, after they had asked for his consent.

The work had not been written especially for the competition and Casken had already paid tax on the grant he had received from the Arts Council which he had declared as earned income (Schedule D) as a composer; and he would be liable for tax on any performance or recording royalties on the work. The shine was taken off this happy day by his Tax Inspector. Casken and the Britten-Pears Foundation, which organised the award, had expected the prize to be exempt from tax-as are literary awards such as the Booker and Whitbread prizes. The Inland Revenue, however declared its intention to tax the prize money.

The Inland Revenue sees prizes as two distinct beasts. On the one hand, there are prizes which are given ‘as part of the exercise of a profession’ (counted as part of an artist’s income, to be taxed accordingly at 25% or 40%, with expenditure being offset against tax). On the other hand, there are prizes which are unsolicited and awarded as ‘marks of honour, distinction or public esteem in recognition of outstanding achievement’. The Inland Revenue gives as examples the Booker and Whitbread Prizes and the Nobel Prize. Such prizes have been exempt from tax since 1979, when the Whitbread Award winner Andrew Boyle won an appeal to the Special Commissioners over an assessment for income tax on the prize then worth £1,000. A key element of the decision by the Special Commissioners was that the award was a voluntary payment which was not solicited by Boyle and did not represent the proceeds of exploitation of the book by him or by his publishers. The Inland Revenue tends to see these prizes as the exceptions from the general rule. Their essential distinction is not that they are literary rather than artistic or musical. It is that they are unsolicited prizes.

The second distinction made by the Commissioners in the Boyle decision appears to be dependent upon the first: it does not represent the proceeds of the exploitation of the book because the prize was unsolicited. Simply put, unsolicited means that the selection panel for the Booker Prize does not receive formal entries from hopeful authors. It simply draws up a list of books which could be awarded the prize and then gradually whittles it down to one. This does not rule out a vast amount of unofficial soliciting on the part of the publishers and authors, but no application process is gone through by the author to request entry into the competition. It is not that they are literary which makes them privileged, but that they are unsolicited.

As for the Britten Award, Casken is now liable to pay tax upon prize money which he did not feel he solicited – he entered his work for the recording opportunity which was offered with the award, and most especially for the ‘mark of honour distinction and public esteem’ which the award of the prize (named after the most famous British opera composer and organised by the Britten-Pears Foundation) would give. The subtle distinction which the Inland Revenue makes produces an interesting inequality in taxation. It is difficult to imagine how a mark of honour and distinction could be made for the visual arts, nor indeed for composition (in the same ways as for literature) without being ‘solicited’. Part of the value of prizes like the Booker and Whitbread is that anyone could win them. Contact between the jury and a vast number of original new works of literary authors is relatively simple compared to the same process for works of visual artists. In the visual arts, original works of art are rarely ‘published’ (in the literary sense) and need to be submitted by someone as physical objects for viewing and adjudication.

For administrators of competitions, awards and prizes in the visual arts the Britten Award decision by the Inland Revenue should be borne in mind henceforth. The Inland Revenue seems to be prepared to look solely at the rubric of the award, rather than at any positive action taken by the artist to achieve it, as the deciding factor for the purposes of taxation. If, for example, an artist’s work has been sold or transferred to someone else who then enters it for a prize or award, there is now the real possibility that any such prize will be taxed as income in the winning artist’s hands – it is likely to be deemed by the Inland Revenue as being having been solicited indirectly on the artist’s behalf. If, however, prizes are awarded on the basis of adjudicators seeking out work for themselves – not ‘sent-in’ work – then, like the Booker and Whitbread Prizes, no income tax would appear to be payable.

An award such as the John Moore Prize, this year worth £20,000, could be taxed as part of the artist’s income because artists have to make a formal entry of their work. This they do, of course, in an attempt to win, to earn income. The Turner Prize, again worth £20,000 this year, is another interesting example. They have asked for nominations. Anyone can nominate a British artist under 50 for an outstanding exhibition or other presentation of work in the 12 months preceding 30 January. It would appear likely that the winner of the Turner Prize could quite possibly avoid paying tax on their winnings – by just getting their mates to nominate them. The Britten Award in fact appears to have been caught out by its insistence that the composer’s work was not thrown into competition without their explicit permission – an admirable intention, but with unforeseen consequences.

For artists entering competitions or putting forward work for awards, they should note that any winnings will almost certainly be taxable as income and, likewise, if someone else enters their work and a prize is awarded to them. Meanwhile, it would be helpful for everyone concerned with administering awards and prizes to make it explicit in any advertising, entry forms or other relevant print, what the tax position is likely to be in the event of success. This may not be easy to express, but some form of warning about tax should be made at the very least. It would also be helpful if the Inland Revenue themselves were to produce a guide, code, or other form of explanation, which administrators could incorporate into their information packages. Ideally the Arts Council and the minister should be active in seeking clarification – if not exemption for all prizes and awards in all artforms. Is there an argument, we wonder that the minister might use along the lines that the monarchy is a work of performance art and, if that work of art can be exempt from income tax on income received by way of gift from the taxpayers of this country as a ‘mark of honour, distinction and esteem’, then so should all other art works.

© Henry Lydiate & James Odling-Smee 1991

 

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.