Revealed: How Treasury chiefs helped The Beatles hide thousands of pounds of unlawful payments from the taxman
· Musicians received thousands of pounds in foreign payments from the US
· Transactions were in breach of strict foreign exchange rules at the time
· The Treasury looked into money but no action was brought against band
By Chris Hastings for The Mail on Sunday
7 December 2014
Unlawful cash payments made to members of The Beatles were covered up by the Treasury, according to Government papers published for the first time today.
Thousands of pounds were transferred from the US to George Harrison and John Lennon in 1973, in breach of strict foreign exchange controls in force in Britain at the time.
But lawyers acting for the Government decided against referring the case to the Director of Public Prosecutions (DPP).
The forgiving stance is ironic given The Beatles’ tirade against the Treasury in their song Taxman, written and sung by Harrison on the Revolver album.
The payments were made via companies, including the Abkco record label, set up by American businessman Allen Klein, who managed The Beatles’ finances after the death of Brian Epstein in 1967 until the band’s break-up in 1970.
Files obtained by this newspaper under Freedom of Information laws show that Treasury and Bank of England officials spent the best part of a year investigating the payments, which included ‘loans’ of £30,000 and $10,000 (approximately £4,000 at the time) to Lennon and Harrison. A payment of £300,387 on behalf of Harrison was also being examined.
Officials were alarmed to discover that neither Klein nor the two stars had contacted the Bank of England to get permission for the transfers, which were made in 1973.
Their failure to disclose the payments was a breach of the Exchange Control Act of 1947, which strictly controlled the flow of capital in and out of Britain.
In a letter dated December 5, 1974, an official in the Treasury Solicitor’s Department told the Bank of England that it should tell solicitors acting for Lennon and Harrison that a decision had been taken not to involve the DPP.
George Harrison and John Lennon (pictured in 1964) received thousands in foreign payments
But the same official insisted that the Treasury’s role in the matter should be kept a secret.
He wrote: ‘In all the circumstances it has been decided not to refer this case to the DPP. I suggest that you say something on the following lines: It has been decided that no action will be taken in respect of any exchange control infringements that have been revealed in the correspondence.
‘I should, perhaps, emphasise that it is important that the above phraseology is used and that no attribution is made as to who actually made the decision, ie you should not say the Treasury.’
In an earlier letter to the Treasury Solicitor, another official urged a speedy solution. He wrote: ‘A great deal of work has been put into the formulation of an agreement to sort the mess out.’
The Beatles pictured in 1964. Documents obtained by this newspaper revealed two of the band's members avoided legal action from the Treasury's lawyers despite being given thousands in foreign payments
In a letter dated November 22, 1973, solicitors acting on behalf of Harrison and Lennon conceded that the payments breached currency regulations. But the lawyers insisted that the two men had received the money in good faith.
After the Beatles split, Klein continued to work with Lennon and Harrison and in 1971 he helped the latter put together the Concert for Bangladesh in support of Unicef’s work in that country.
Klein was jailed in 1979 for two months for tax evasion after it was discovered he defrauded both the concert and Unicef. He died in 2009.
Lennon’s decision to ask Klein to manage the Beatles’ financial affairs was one of the reasons why the band broke up. Paul McCartney did not believe he was the right man for the job.
In an interview with Jonathan Ross which was broadcast last night, Sir Paul said: ‘We got to a point where we got really crappy over business... for years I thought, “Oh, me and John, bitter rivals” and all this stuff.’
Yoko, John, Allen Klein, Paul and Ringo