Editing XTC (section)

===Financial issues and start of managerial litigation ===

{{Quote box
 | quote = [Because of our] bad record deal and a corrupt manager, life was a bit of a nightmare ... When I said we don't want to play live anymore, they [Virgin] completely stopped [promoting us] ... We ran on negative equity for 20 years. 
 | source = —Andy Partridge, 2000<ref name="Dom2000" />
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 | width = 25em
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The cancelled American tour saddled XTC with a £20,000 debt, and since it left them unable to record new material, they decided to reexamine their financial affairs.{{sfn|Twomey|1992|p=127}} Confused as to where their earnings had gone, the group requested that manager Ian Reid help pay for the debts, but he refused, saying that they had owed him money. They tried distancing themselves from Reid by renegotiating their contract with Virgin. Six more albums were promised to the label in exchange for covering their debts, as well as a guarantee that subsequent royalty and advancement cheques be redirected into the band's own deposit account. Royalty rates were still kept relatively low, as the group's A&R man Paul Kinder explained, they had "appalling management for a number of years. Usually if a manager has got any kind of business acumen he will renegotiate the contract to get a better royalty. A record company expects this, which is why they keep royalties low initially. It's just business really. Nobody addressed the contract for XTC."<ref name="Mojo1999"/>

Reid remained XTC's manager until January 1983 (according to the book ''Chalkhills and Children''){{sfn|Twomey|1992|p=131}} or a couple years afterward (according to Partridge).<ref name="TrainPar">{{cite web |last1=Bernhardt |first1=Todd |last2=Partridge |first2=Andy |author-link2=Andy Partridge |url=http://chalkhills.org/articles/XTCFans20090614.html |title=Andy discusses "Train Running Low on Soul Coal"|website=Chalkhills |date=14 June 2009}}</ref> He legally retained the title of XTC's manager until near the end of the decade.<ref>{{cite tweet |user=xtcfans |last=Partridge |first=Andy |author-link=Andy Partridge |date=29 January 2019|number=1090251077918908416|title=WC-"Reid was no longer the band's manager, but legally retained the title until around 1985[.]" No, we finally parted ways in 88–89 I think. Colin and I came back from ORANGES mixes in LA to try and sort the legal mess over management.}}</ref> In April 1984, the group learned that he had incurred them an outstanding [[Value-added tax in the United Kingdom|value-added taxes]] [VAT] bill{{sfn|Twomey|1992|p=137}} and that he had significantly mishandled their revenue stream.<ref name="Contrast1990"/> A lawsuit was filed by the band, while he counter-sued for "unpaid commission on royalties". Virgin were then "legally required to freeze royalty and advance payments and divert publishing income into a frozen deposit account."<ref name="Mojo1999"/> For the next decade, the entirety of the band's earnings would be invested in the continued litigation.<ref name="HuntPhaze" /> The group supported themselves mostly through short-term loans from Virgin and royalty payments derived from airplay.<ref name="Mojo1999"/> At one point, Moulding and Gregory were working at a car rental service for additional income.<ref name="O&LQuietus" /> Partridge was eventually left with "about £300 in the bank", he said, "which is really heavy when you've got a family and everyone thinks you're 'Mr Rich and Famous'."<ref name="HuntPhaze" /> A court-enforced [[gag order]] restricts the band from speaking publicly on the alleged improprieties.<ref name="Sailed2006" /> According to Partridge, Reid was "very naughty" and left the band with roughly £300,000 in unpaid VAT.<ref name="HuntPhaze" /> Music journalist Patrick Schabe elaborates:

{{blockquote|... what is known is that [Reid] signed a deal with Virgin that wound up working out primarily for Reid, secondarily for Virgin, and not at all for XTC. Throughout their first five years of existence, XTC never saw a penny of profits from either album sales or touring revenue. Reid, on the other hand, took out large loans from Virgin, borrowing against XTC's royalties, to the tune of millions of pounds by some estimates. Even after the band settled out of court with Reid, because of the terms of the contract, Virgin was able to hold XTC liable for the sum. Because of XTC's failure to tour, the likelihood of ever repaying Virgin dwindled further and further away. Over the course of a 20-year contract with Virgin Records, and after achieving gold and platinum status in album sales on a number of discs, XTC never saw any publishing royalties.<ref name="Sailed2006" />}}