Tax fraud investigation

Tax Fraud Investigation Hits UK’s Premier League

Earlier this week, in a joint effort with French tax authorities, the UK’s Her Majesty’s Revenue and Customs (HMRC) raided the headquarters of professional football teams Newcastle United and West Ham United and arrested three football agents, French footballer Sylvain Marveaux and the former squad’s managing director Lee Charnley.

The arrested men are being accused of partaking in income tax and National Insurance fraud worth approximately £5million.

HMRC, as reported by The Guardian, “searched a number of premises in the north-east and south-east of England and arrested the men, and also seized business records, financial records, computers and mobile phones.” 

An HMRC spokesperson spoke about this raids, stating, “The French authorities are assisting the UK investigation, have made arrests and several locations have been searched in France. This criminal investigation sends a clear message that, whoever you are, if you commit tax fraud you can expect to face the consequences.”

Additionally, the French Prosecutor’s office stated that “the British authorities suspect secret payments may have been made to benefit certain players, their agents or third parties, allowing them to avoid paying tax on the income, or making social security payments."

Image Rights at the Center of HMRC's Tax Fraud Investigation

Image Rights at the Center of HMRC's Tax Fraud Investigation

This investigation stems from an effort by HMRC to deal with earnings associated to footballers’ image rights and the different tax rate applied to this money.

According to PA Sport and as reported by ESPN, “HMRC has questioned clubs and players in the past when a player lacking a public profile claims that significant earnings are from image rights.”

David Conn for The Guardian summarizes HMRC’s concern over image rights nicely: “Wranglings over the payment by clubs to players, often to offshore tax havens, for use of their images, has been a constant rumble of contention between the tax authority and the Premier League for more than a decade.”

Spokespeople for West Ham United said the team is “cooperating fully with HMRC to assist their enquiries. No further comment will be made at this time.”

Earlier this year, a committee in Parliament announced that 43 players, 12 teams and 8 football agents are under investigation by British tax authorities.

Tax Experts Discuss HMRC’s Football Tax Fraud Investigation

Tax Experts Discuss HMRC’s Football Tax Fraud Investigation

Commentary on the most recent HMRC tax fraud investigation has been varied within the tax planning industry.

Andy Wood, director at Enterprise Tax Consultants, believes these moves shows that HMRC is very serious about tackling tax evasion and targeting VIPs.

“HMRC is being very bold in describing this as fraud from the outset, as that is a criminal offence and potentially carries severe penalties for individuals whom it can prove have been guilty of such activity,” Wood said.

"However, the Revenue has not been shy of late in making clear its desire to tackle high-profile figures and companies whom it believes are avoiding or evading tax, partly because of the deterrent effect. In football, that has been certainly the case following HMRC's clamping down on the use of employee benefit trusts of the sort which were at the heart of Rangers' liquidation in 2012 and the recent hearing in the Supreme Court,” he added.

Isobel Clift, Blick Rothenberg’s tax investigations manager, agreed with this sentiment, saying, “Today’s raids will prove beyond doubt that HMRC are not afraid to use the powers at their disposal, including those allowing entry to business premises and the confiscation of relevant information and devices."

“The raids send an equally clear message that HMRC will proceed criminally where appropriate and will ensure that those involved are arrested and charged,” she added.

On the other hand, Milestone International Tax Consultants’ Tom Wesel showed a lot more reserve when discussing this tax fraud investigation.

Wesel said, “HMRC has recently ‘discovered’ footballers as a soft target” and “these raids could be a scare tactic, forcing the clubs to negotiate over arrangements that were entered into in good faith with professional advice. Or, the clubs may have been daft enough to engage in what was obviously fraud.”

Wesel expressed his concerns over this tax fraud investigation, warning that "powers to raid and seize documents have been hugely expanded in recent years in very worrying ways - it’s at risk of degenerating into a lawless envy fest."

Partner and head of tax law at Pinsent Masons, Jason Collins, also encouraged tax planners to be prepared for what he sees as greater HMRC activity aimed at curtailing tax evasion.

“The Revenue gains a powerful tool this year - the new offence for the failure to prevent the facilitation of tax evasion - and it is already stepping up activity in preparation. Activity will be ramped up even further once it is actually operational," said Collins.

“Corporates need to be aware of the new powers the Revenue will have at its disposal this year, and take steps to ensure their affairs are in order," he added.

Any thoughts on HMRC’s tax fraud investigation into footballers in the UK?

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