Rupert Grint: Harry Potter star loses £1.8m tax appeal due to 'Beatles Clause', what is it, net worth

The First-Tier Tribunal ruled in favour of HMRC, citing a historical anti-avoidance measure known as the “Beatles clause,” which prevents entertainers from converting high-tax income into lower-tax capital.

Grint, who began his acting career at 13, earned millions from the Harry Potter franchise. In 2011, he transferred his rights and residual payments for future TV/DVD sales, worth approximately £4.5 million, into a company, Clay 10 Limited, which he owned. His father, Nigel Grint, managed the company as its sole director.

Grint declared the payments as a capital gain rather than income, benefiting from the entrepreneur's relief, which allowed him to pay just 10% capital gains tax instead of the 50% top income tax rate at the time. This move reduced his tax bill on the £4.5 million to around £450,000, instead of the approximately £2.2 million he would have paid as income tax.

However, HMRC intervened in 2014, citing provisions under the Beatles clause, now enshrined in s773 of the Income Tax Act 2007, which treats such conversions as income. After years of investigation, HMRC issued a closure notice in 2019, demanding the full tax amount with adjustments for capital gains tax already paid.

Tax expert Dan Neidle, who founded Tax Policy Associates, explained in a series of tweets how this rule got its name. In the 1960s, the Beatles, facing a 95% top income tax rate, famously set up a company to hold their music rights, converting their earnings into capital gains taxed at a much lower rate of 30%.

Neidle tweeted: “The Beatles weren't particularly shy about their view of the 95% income tax rate (in their song, Taxman): ‘There's one for you, nineteen for me.’”

The taxman responded by introducing the Beatles clause to stop such arrangements, ensuring income disguised as capital would still be taxed as income. Neidle added: “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 Tribunal upheld HMRC’s stance, dismissing Grint’s appeal. It stated: “To hold that the question of whether income tax is due on the ‘capital sum’ can be examined as widely as might be necessary... does not lead to a roving enquiry and/or result in any unfairness to Grint.” This has resulted in Grint owing £1.7 million in unpaid taxes, plus interest.

Summarising the case, Neidle pointed out: “Grint was 23 at the time. I doubt he understood what was going on, so it would be unfair to blame him for this. It looks like his father was running his finances.”

The broader issue, he argued, lies in the tax system itself. He said: “We need to put blame where it's deserved: a tax system that creates artificial categories of things and then taxes them differently. Of course, people will respond to that.”

This isn’t Grint’s first tax-related loss. A previous tribunal ruled against his attempt to extend an accounting period to avoid a higher tax rate.

According to Market Realist, Grint, now 36, has an estimated net worth of approximately $50 million (£40 million). This wealth primarily comes from his earnings during the Harry Potter franchise, where he reportedly earned $70 million (£55 million) across the eight films.