Taxman Targets EPL

[ian1964 10,669]

THE taxman has launched a �£150m war on English football.

 

HM Revenue and Customs are taking on Portsmouth in the first salvo of a three-pronged attack on the game.

 

They want to:

 

* Stop clubs dodging tax by putting lesser- known players on huge image rights deals and claw back �£100m.

 

* Confiscate millions more in VAT rebates which clubs claimed back on agents' fees.

 

* Tear up Premier League regulations and the rules of football so players, managers and other clubs no longer have to be paid in full when a club like Portsmouth goes belly up.

 

And if they succeed, English football will never be the same.

 

Clubs, already hit by the global economic crisis, will face big bills and then either have to accept they cannot compete or take even greater risks to do so.

 

And banks, who are already growing more wary of lending money to an industry which spends like there is no tomorrow, would take a tougher stance on football.

 

Most significantly, it is likely they would start cutting or withdrawing the lines of credit which prop up the Premier League, whose total debt is an eye-watering �£3billion.

 

HMRC's appeal against Portsmouth's bid to come out of administration will become a test case on the image rights issue.

 

Victory would give them the green light to go after the �£100m their investigation says they are owed across the board. Triumph in the long-running VAT case would bring in just millions more.

 

But the ultimate target is the football creditors rule and bringing to heel a sport which has taken the mickey out of the taxman for far too long.

 

PORTSMOUTH may be forgiven for feeling persecuted but the taxman's latest legal threat is nothing personal.

 

Pompey are just the most farcical and shocking example of the way Her Majesty's Revenue and Customs reckon football has taken them for a ride.

 

And now it's payback time.

 

For more than two decades, the taxman has tried - and mostly failed - to make football cough up what it owes.

 

Inquiries into alleged bungs failed to add a single name to the George Graham roll of shame. But HMRC are now determined to clamp down on other forms of alleged tax-dodging, especially image rights payments to players.

 

A tax spokesman said: "The Government remains committed to ensuring everyone pays their fair share of tax and that the minority who seek not to do so, shouldn't succeed.

 

"Image rights is a technical area where the tax treatment will be largely dependent upon the facts of the particular case."

 

Pompey are far from alone in paying certain players for the right to use their image or reputation to sell products. But the amount HMRC are claiming from the Fratton outfit is a huge - �£13,293,651.72.

 

And, don't forget, that's �£13million in unpaid tax. The actual sum they have paid out in image rights over a number of years is far more.

 

Manchester United, when announcing the bond issue used to refinance their debts earlier this year, told potential investors they could owe the taxman up to �£5.3m in relation to image rights.

 

Assuming the taxman assessed the clubs over the same period, Pompey somehow owe more than twice that owed by the biggest club in the world.

 

The latest accounts for the Hong Kong-based company that ultimately owns Birmingham report a potential bill for more than �£5m. That would be the level you might expect at Portsmouth. But �£13m?

 

United can legitimately argue Wayne Rooney (below) is worth the �£760,000 he is paid per year in image rights.

 

But the list of debts published by Pompey's administrators reveals some strange names. Tal Ben Haim (below right), John Utaka and Lauren, players whose commercial pull is hardly substantial, are all owed image rights money.

 

The exact sums are not revealed - though we do know Sol Campbell is claiming �£1.7m - but they are the sort of names HMRC have been investigating on a deal-by-deal probe into the Premier League.

 

The suspicion is this: in order to attract a certain level of player, clubs who cannot afford to meet their wage demands and the tax on them work round it. They pay a basic salary and the 40 per cent tax rate on it, but also pay image rights into a separate company, often based in a tax haven.

 

If the player is from the UK, he will pay between 21 and 28 per cent corporation tax; if he is from overseas, he may well end up paying no tax at all.

 

While David Nugent's image rights payments went to a firm in Rochdale, Croat Niko Kranjcar had his cash directed to Nakano Advisors Corp in the British Virgin Islands and Ben Haim's was collected by Talis Assets Ltd in Guernsey. If HMRC can convince the High Court in the autumn that Portsmouth owe all or some of the �£13m, there will be two sets of consequences: Some for Portsmouth, some for football in general.

 

Legal

 

In June, Pompey's creditors approved a Company Voluntary Arrangement which would pay them just 20p for every pound they were owed. HMRC believe that is not a big enough return for the public purse and that the voting was unfair.

 

Why? Because administrators did not include the �£13m of image rights tax debt. Had it been included, the taxman could have voted down the CVA because they would have spoken for more than 25 per cent of the total unsecured debt.

 

So HMRC would be able to force the administrators to come back with a better offer. But they would also have legal backing for their attempts to collect at least �£60m in back tax from across football.

 

A leading agent said: "It would cause problems for some clubs because the tax bill could push them out of business."

 

The big clubs could still attract the biggest players by paying well for their image rights. But smaller clubs may find convincing a certain level of player harder.

 

The agent feels the taxman is being harsh on football and that the Prem and FA must take steps to minimise the damage.

 

The agent said: "Football is sexy and going after the game gives tax officials something to talk about down the pub.

 

"What about rugby league, rugby union and cricket? The FA and the Premier League should sit down with taxman, draw a line in the sand and agree to pay compensation on behalf of their clubs to sort out the current situations.

 

"Then they should come up with cast-iron guidelines across ALL SPORTS.

 

However, the taxman's Holy Grail is to overturn the football creditors rule whereby players and other clubs are paid in full while other creditors settle for a proportion of money owed.

 

A tax source said: "It is not acceptable that people in football can walk off into the sunset, paid in full.

 

"It's not a tax on football, it's about getting people to pay their fair share to UK plc."

[Bluedell 5,513]

I believe that they are correct on the first and third points. Don't agree with them on the VAT on agents' fees though, although don't know the technical issues involved.

[Zappa 0]

The third point sounds just wrong to me. Players, managers and other clubs shouldn't be the one's liable to take a loss when a club goes belly-up. It could be argued that other clubs owed money for player sales are liable to take a loss since they entered into a payment/finance agreement, but legally they should still be able to get their money back somehow anyway, even if it's through insurance. What I don't understand is why players and managers employed by clubs should have to take a loss. Surely that liability should be on a club's lenders and insurance co's before the actual employees?

 

With the VAT on agent's fees, you'd have thought there would be nothing wrong with a club claiming back the VAT if they were actually charged it in the first place, but if an agent isn't VAT registered and not charging VAT, then that's where a club could be in the wrong for claiming it. Maybe I'm misunderstanding though...

[Bluedell 5,513]

The third point sounds just wrong to me. Players, managers and other clubs shouldn't be the one's liable to take a loss when a club goes belly-up. It could be argued that other clubs owed money for player sales are liable to take a loss since they entered into a payment/finance agreement, but legally they should still be able to get their money back somehow anyway, even if it's through insurance. What I don't understand is why players and managers employed by clubs should have to take a loss. Surely that liability should be on a club's lenders and insurance co's before the actual employees?

 

 

Why should the players get preferential treatment over all the other creditors of the club? Wee Jeanie who supplies the pies from her corner shop gets 5p in the pound while the multi millionaire players get paid in full? Hardly fair.