By Alex Miller
13 January 2012
Leading football clubs are being heavily targeted by HMRC over perks afforded to players and WAGs – partially because the taxman has already received information and tip-offs relating to major financial discrepancies at at least one top Premier League club, Sportingintelligence can reveal.
The finance directors at all Premier League were recently sent a questionnaire containing 181 questions looking closely into the financial affairs of the clubs and players, specifically the issue of perks, as HMRC looks to crack down on blatant abuses of the system.
A well-placed tax source told Sportingintelligence: “We’ve picked up from a variety of sources that there are issues that may be of concern to us. Football is a cash rich industry at the top end and that raises its risk assessment.
“HMRC has found big discrepancies in at least one club and they now want to make sure these discrepancies are not widespread”.
Another major driver in the offensive on football is the hardening attitude of Government ministers that tax avoidance is unacceptable and that everyone should be paying their share in testing times.
Some critics of HMRC believe a crackdown on football is an easy display of intent that fails to clamp down in more significant areas.
But the coalition Government has set a target of £8bn it wants to claw back in additional tax during this term. The move is also part of wider moves to bring football clubs into line with other big businesses.
HMRC is eager to ensure tax has been paid on perks such as exotic holidays. A number of Chelsea players have taken breaks on luxury yachts belonging to owner Roman Abramovich. These are just one of a number of perks HMRC want satisfactory answers to.
The full extent of the taxman’s investigation into top footballers such as Wayne Rooney and Carlos Tevez and their clubs is astonishing. HMRC is looking at every aspect of football business and finance – and leaving no stone unturned as it looks to claw back millions of pounds from both clubs and players.
The sheer scale of the questionnaire has surprised even tax experts.
Sportingintelligence can exclusively reveal the questions from the questionnaire, including:
- 4.14 Are any payments made into trusts or sub-trusts, whether in the UK or abroad, for which employees or family members are, or are potentially, the beneficiaries?
- 1.2 Are any expenses paid, or benefits provided, to players’ or other employees’ spouses, partners or other family members, whether in the UK or abroad?
- 11.6 Has the club paid any expenses relating to an employee’s private holiday costs? If so please provide details.
- 11.7 Are there any circumstances where the cost of spouse travel will be paid for by the Company? If so please provide details.
- 22.1 Are complimentary tickets, use of a box, etc. provided for employees? If so please provide full details.
Sportingintelligence also understands the tax affairs of foreign players will come under greater scrutiny. In some cases players have been found not to have paid National Insurance contributions (NIC).
Other questions asked:
- 5.3 How does the club treat payments to foreign players for payroll purposes?
- 4.2 What controls are in place to ensure that any amounts which are paid out are treated correctly for tax and NI purposes?
Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), says: “There are clearly a lot of issues the HMRC wants answers on. I know there have been cases of overseas players with no trace or evidence of them paying any NIC whatsoever.
“HMRC is determined to give football a good kicking if it is found that players and WAGs are driving around in Ferraris and Porsches or enjoying holidays that are not properly accounted for and don’t abide by third party benefits rules. Nobody minds them living it up – so long as they do so after paying their taxes.”
Last year it was found that Manchester United star Wayne Rooney had saved almost £600,000 in two years by using a tax loophole, which was also exploited by other top footballers. Under the scheme, the players have two contracts with clubs. One pays them a salary, while the other is for ‘image rights’ – earnings from shirts and other merchandising. These royalties are paid into a company set up by the individual player, which is liable for only 28 per cent tax.
HMRC is understood to be involved in ongoing negotiations with several leading clubs on the issue and hasn’t yet rules out litigation if an agreement cannot be reached. A number of other clubs have now agreed settlements.
Next week sees HMRC take on Glasgow giants Rangers in court over previously used employee benefits trusts (EBT) to pay players. In what is seen as a test case, HMRC are aggressively chasing £35m from the club. If they lose the three-day case, Rangers face a potentially crippling bill of £49m (including penalties), while the taxman would effectively be given a green light to chase other clubs who have used the tax avoidance scheme.
Under a typical scheme, players would be employed by an EBT scheme provider based offshore, such as on the Channel Islands.
As an employee, the player would be paid a salary, which would attract tax and NIC in the usual way. However the scheme provider would also make significant payments into a trust, which would then loan the money to the player indefinitely – the loan element not being subject to tax and NIC.
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