Barbie is the girl who has it all. The outfits, the car, the dream home, the friends. And all of it simply laid at her feet, with no responsibility or effort.
But it’s precisely this dynamic that the blockbuster Barbie movie, currently breaking box office records all over the world, sets out to examine. Is a life of free-for-all fun and effortless attainment really all that fulfilling and meaningful? Or does it all feel a little, well, plastic?
The eponymous hero starts to wonder, and sets off from Barbieland into the human world to learn some important life lessons in what it means to value what you have.
We won’t risk any spoilers about the kind of things Barbie does learn from her journey of self discovery. But the premise of the movie got us thinking – what financial advice, including tax advice, could you give to a girl who has had it all, who suddenly might have to start paying her dues?
Here are three things that came to mind.
Keep on the straight and narrow when it comes to following the rules
Ok, we’ll start with a ‘lesson’ that has got a lot of attention already, and it isn’t really one for Barbie the character. It’s more of a ‘real-life’ lesson concerning Barbie’s creator, Ruth Handler.
Handler appears in the movie, and her character makes several cheeky references to being in trouble with the IRS, the US equivalent of HMRC. This has led to a rush of internet rumours that the real-life Handler, who co-founded Barbie manufacturer Mattel with her husband, was investigated and/or charged with tax evasion.
In fact, the movie’s creator Greta Gerwig has exercised a little artistic licence with the IRS references. Handler did face prosecution for financial irregularities, but it was nothing to do with taxes. In 1978, the Securities and Exchange Commission (SEC) – a regulatory body similar to the FCA here in the UK – charged Handler and other Mattel executives for falsifying business records. In short, company bosses had tried to hide the fact that the company was making a loss to keep its stock price high.
After pleading no contest to the charges, Handler received a $57,000 fine – equivalent to more than $250,000 today – and five years’ probation. The size of the fine underlines how seriously making false or fraudulent financial statements is taken. Last year, three top executives involved in the high-profile Carillion collapse were fined close to £1m in total for doing something similar to what Handler was prosecuted for – cooking the books to hide the true scale of Carillion’s financial troubles.
The lesson for Barbie (and any would-be toy entrepreneurs) – making your fortune by running a business isn’t always plain sailing. But falsifying accounts to in an attempt to hide the tough times simply does not pay, and will only end up costing you dear on a personal level.
Watch out for Capital Gains Tax if you’re buying and selling all those Dream Houses
One of the things people associate most with Barbie is the Barbie Dream House – a luxury residence if ever you saw one, assuming pink plastic is your thing.
Over the years, Barbie has had many ‘dream homes’ – not an issue in Barbieland, of course, but potentially problematic when she makes the switch to the real world. Multiple home ownership carries all sorts of tax implications, not least the potential payment of Capital Gains Tax when you sell property that is not your main residence.
But let’s assume that Barbie hasn’t brought a large Dream House portfolio with her into the real world. She sensibly sticks to just one. But then she wants to move. She has seen a new Dream House model she likes. But it takes time to assemble. She purchases the land (or possibly a table) to put her new Dream House on so building can commence, selling her old Dream House when it is finished. But now she has two properties, is she still able to claim Private Residence Relief (PRR) on the sale of her old home?
The good news for Barbie is that S223ZA TCGA92 provides relief for just such a situation.
If the following conditions are satisfied the house is treated as being Barbie’s only or main residence from the beginning of ownership of the land, even if she has not yet moved in because the house is not fully assembled:
- the time between the period of ownership and the moving-in time was within the first 24 months of the period of ownership, and at no time between the start of the period of ownership and the moving-in time was the house or the part of the house another person’s residence;
- during the period between the start of ownership and the moving-in time, one of the following qualifying events occurred:
- the completion of the construction, renovation, redecoration or alteration of the house or the part of the house; or
- the disposal of any other house or part of a house that immediately before the disposal was her only or main residence.
So as long as Barbie can get her Dream House assembled within two years, and doesn’t allow Ken to claim residence, she can claim PRR for the period of assembly.
With all those career changes, Barbie should probably think about consolidating her pension schemes
Barbie has famously had more than 200 jobs in a long and varied career. But one question that Doctor Barbie, Aircraft Pilot Barbie, Film Director Barbie and all the rest should be asking is, what has happened to all my pension contributions?
In the age of auto-enrollment, every new job you take in the UK means paying into a new pension fund. So somewhere, Barbie could have 200+ pension pots sitting around, with money she has paid in to invest in her future. Where are they all? How much is in them? And how does she draw from them when the time comes to call time on her staggeringly varied career?
Barbie might be at the extreme end of things, but with so many people regularly changing jobs and careers these days, a lot of us can relate to her situation. Every pension pot we are automatically signed up for is our money, but do we keep track of it?
There are no direct penalties for being in multiple pension schemes, in terms of taxation or otherwise. But every scheme will have its own administration fees. If you leave a scheme but do nothing about it, you might be charged inactivity fees. For Barbie, that’s a lot of costs whittling away at the value of her many pensions.
Consolidating multiple pensions into a single scheme gives you control and oversight over all the money you have invested for your future. It cuts down on charges, and makes it easier to draw from your funds when the time comes to retire.
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