Tax Advice

Adele repaid millions to HMRC after dividend mix-up

16 Jun 2016

Adele: “Hello?”
The Taxman: “Hi, this is HMRC. You owe us £2.5 million.”

OK, it probably didn’t go exactly like that, but that’s basically what happened earlier this week when it was revealed that Adele has had to pay £2.5 million to HM Revenue & Customs after she accidentally paid herself too much in dividends last year.

In what insiders described as an “embarrassing mistake”, the award-winning singer, who is worth an estimated £88 million and was recognised as Britain’s richest female musician on this year’s Sunday Times Rich List, was forced to pay £2.5 million to the taxman when her accountants discovered that the dividends she had paid herself were significantly more than the accumulated profits her company should have had available for distribution.

Adele

'Rumour Has It'

Adele manages her personal finances via two limited companies, Melted Stone Limited and Melted Stone Publishing Limited. She is sole director of both businesses, which she uses to receive royalty payments and other income before distributing the profits to herself as dividends.

However, Corporation Tax must be paid before dividends are issued and there are strict rules in place (the Companies Act 1985, section 263, to be precise) that are intended to ensure that when shareholders agree to issue dividends the resulting distributions aren’t greater than the limited company’s post-tax profits plus retained earnings. It appears to be those rules that have resulted in Adele ‘Rolling in the Deep’.

‘Don’t You Remember?’

It seems the singer gave a rather large creditor the ‘Cold Shoulder’ by failing to take into account the sizeable sum of money she owed them prior to paying herself a dividend of £7 million from Melted Stone Limited. 

A further dividend of £4.25 million paid to her by Melted Stone Publishing Limited seems to have been correctly accounted for, as it didn’t run afoul of the taxman.

Adele Money

‘Right as Rain’

However, although an unexpected tax bill for £2.5 million is nothing to laugh about, it’s likely Adele’s bank balance will recover very quickly. The star is reportedly set to sign a £90 million record contract with Sony Music, which will be the largest record deal ever signed by a British musician.

So don’t worry too much about Adele – she’ll be ‘Right as Rain’.

Keir Wright-Whyte

photo

Managing Director

0207 043 4000

About the author

Originally graduating with a degree in geography from Edinburgh University, Keir claims that he was then tricked into becoming an accountant by one of the UK's top 5 accountancy practices.The deception extended to the usual training in audit and associated activities.

Keir subsequently worked in a number of advisory roles with clients including in the energy trading, pharmaceuticals and financial services sectors.

He loves working at Accounts & Legal because of the variety of work and clients, the excellent team ethos and morale, the importance placed on genuinely helping and being useful for clients and because he believes what he does matters to clients and helps the firm.

Keir's primary role is to ensure that new clients with complex businesses or needs are on-boarded in the best way and he is a "trouble shooter" both for clients and where complex issues arise internally. He also helps the accounting teams strive to improve what we do for clients, whether processes or services.

When not debiting or crediting, Keir has a penchant for fixing old buildings, skiing, surfing and cycling.

  

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