The blaze of publicity surrounding the high profile raids both in U.K.and France on Wednesday 26/4/2017, brings renewed focus on tax avoidance / evasion in Premier league football.
HMRC have described the raids on Newcastle United and West Ham as 'criminal investigations' , and following a request for Mutual Legal Assistance from the French Judicial authorities last year, simultaneous raids and arrests were made in both Countries.
What is it all about?
Apparently and according to various press reports ( The Financial Times ) there are a number of strands to the investigation including the suspicions of 'illicit ' Payments made to players / managers :the use of offshore corporate vehicles for the receipts of monies paid for the use of image or personality , and the concern that such payments are in effect 'disguised remuneration '( avoiding the usual income tax and National insurance rates but availing of heavily reduced Corporation tax rates) Presumably the involvement of the French Judicial authorities implies that the major focus is upon the number of French players / managers who have or are playing in the Premier League and who have been encouraged by their advisers to exploit off shore corporate vehicles .
What are image or personality rights?
Legally these are intellectual property rights surrounding a player or managers image e.g. Trademark , copyright contractual rights , however HMRC are correctly of the view that image or personality rights do not exist in UK law per se - just the intellectual property rights.
The incredible financial value of these 'image rights 'were recognized in the early 2000s and has been highlighted by Wayne Rooney 'image rights ' earnings of £750,000 per an ( disclosed in 2010) and Manchester United's battle with HMRC over a disputed £5.3 million , also in the same year .
Players and / or managers would, upon advice set up Image Rights Companies ( IRCs)and would happily pay the lower Corporation tax of 20% rather than the higher rate personal income tax rate of 45% and National insurance rates, so it was a very attractive proposition for any Premier League player or Manager.
One of the issues, is that not all those who availed of the IRCs were immediately ... er ...recognizable, and their image or personality were not quite as valuable as they may have thought , certainly not according to HMRC.
These investigations have been a long time coming , in December 2016 HMRC informed the Public Accounts Committee reported that their specialist team of investigators were closely looking at 43 players , eight agents and 12 clubs in connection with 'image rights 'payments. (Though The Mail reports that over 200 individuals are under investigation ) The Public Accounts Committee itself reported in January 2017 and concluded that these 'image rights ' arrangements were being exploited for tax avoidance .
The Premier League has set up a 'Voluntary Disclosure ' facility for Premier League clubs to report these arrangements to HMRC in the hope that they will be signed off with HMRCs blessing , the problem is that not all the clubs in that league have signed up to this VDF.
As we highlighted earlier, HMRC have labelled this particular investigation as a criminal investigation into £5million, but is it tax Evasion, which is a criminal offence, or tax avoidance which is not ?
This is of vital importance ... the sentences of imprisonment handed down for tax evasion are huge ( not forgetting the confiscation proceedings that will undoubtedly follow ) However tax avoidance attracts the civil penalty scheme. The Public Accounts Committees conclusions point to tax avoidance.
HMRC investigation and prosecutions - get expert advice
If you are under investigation or you feel that you are likely to be, then you will need immediate expert advice from lawyers equally as familiar with defending HMRC investigation and prosecutions in both the criminal and civil legal jurisdictions.
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