U.K. Tax Authority in Line for Soccer Club Court Case Hat-Trick

Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.

By Ben Stupples

The U.K.’s tax authority will mark its third court case win of the year over top soccer clubs if it secures a victory over Tottenham Hotspur Football Club next month.

Contesting the taxation of termination payments to players, Her Majesty’s Revenue and Customs will appeal a 2016 First-Tier Tribunal decision on Premier League club Tottenham Hotspur at the Royal Court of Justice Nov. 8, according to a government register.

HMRC’s efforts to overturn the ruling on Tottenham Hotspur, who currently lie third in the Premier League, will follow its two victories over soccer clubs earlier this year.

In a decision released Oct. 4, the High Court dismissed a challenge from Newcastle United over the legality of HMRC’s three April 26 raids of the club in an ongoing tax evasion probe. On the same day, the tax authority also raided premises linked to fellow Premier League club West Ham.

In addition, HMRC won a seven-year battle July 5 at the Supreme Court, the U.K.’s highest, with Scottish Premiership club Rangers over the staff payments that avoided tax through contrived employee benefit trusts.

Convincing Win Last Year

Ahead of next month’s hearing, a Tottenham Hotspur spokesman told Bloomberg BNA that the club’s case is completely separate from the Oct. 4 ruling involving Newcastle United.

In last year’s case, released June 3, the club won “convincingly,” he said in an Oct. 5 email.

Earnings vs. Compensation

In November, HMRC will claim again that Tottenham Hotspur’s payments in August 2011 to two players ahead of both players joining Premier League club Stoke were earnings from the players’ employment. From the government’s perspective, these transactions should have subsequently faced both income tax and employment tax, known as National Insurance Contributions.

Tottenham Hotspur disputes this point, arguing the payments to England forward Peter Crouch and Honduras midfielder Wilson Palacios were compensation for terminating their contracts early.

Outlining the tax authority’s position for next month’s hearing, a spokesman for HMRC told Bloomberg BNA in an Oct. 5 email that it has applied the “correct tax treatment to the payments to the players, and we are pursuing our appeal of the First-tier Tribunal’s decision.”

Payments to Football Agents

Separate to Tottenham Hotspur’s case, Newcastle United is at the center of HMRC’s investigation on whether payments made both to and via soccer agents helped players and clubs evade taxes.

In the club’s court case, which took place in July, Newcastle United challenged HMRC’s legal grounds to search and seize evidence from three premises linked to the northeast England club.

Prior to the case’s verdict, HMRC had been unable to examine the “large volume of information” it seized as evidence from the premises, which included the home of Newcastle United’s managing director.

HMRC is “pleased” the High Court deemed the search and seizure warrants for Newcastle United’s premises as legal, a spokesman told Bloomberg BNA in a second Oct. 5 emailed statement.

By contrast, a Newcastle United spokeswoman said the club is “disappointed” with the verdict.

“We are considering all of our options with our advisers,” she said in an Oct. 5 emailed statement. These options include “whether to pursue an appeal.”

To contact the reporter on this story: Ben Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International Tax