Tax authorities on a football winning streak

The beautiful game has had some ugly tax wrangles, writes Brian Keegan

Tax authorities on a football winning streak

Here’s one for all you armchair soccer pundits — what have Ronaldo and Messi got in common? Aside from going home from the World Cup early, that is.

One possible answer is that they have both been in the public eye at other times not for soccer but for tax reasons.

Not just players, but clubs including Manchester United, Manchester City, Burnley, Portsmouth and Glasgow Rangers have enjoyed varying degrees of attention from the Revenue authorities over the years.

It’s only to be expected that the competitive instinct on the park would transfer across into all areas of the business that is soccer.

Tax litigation against clubs and players is not a new phenomenon.

The man who set the ball rolling was a player called Harrison, who used to play for Everton.

He signed for them in 1913 under a scheme whereby he’d get a bonus for every five years he stayed with the club.

The bonus in question was £650 and Mr Harrison reckoned that his bonus shouldn’t be taxed.

I imagine £650 was a tidy sum of money at the time, although in today’s terms, it’s about what a top player can earn in 20 minutes.

The tax authorities won that case, thereby establishing a winning streak against the sporting fraternity in cases which often involved perks and benefits other than straight salary.

Somewhat against the run of play was a victory for the 1966 World Cup winning squad.

The UK Revenue apparently didn’t think it was all over for Geoff Hurst and Bobby Moore.

They raised assessments on a payment of £1,000 received by each player after the competition from the English FA, for the 1966/67 tax year.

The learned judge, possibly a closet fan, decided that the £1,000 was like a testimonial award, rather than a straight payment of wages.

One of the deciding factors for him was that the players did not know in advance that they would receive such a payment if they were to win the World Cup.

Presumably they didn’t know in advance that they were going to win the competition either.

It’s not just English and Portuguese and Argentinian international players who get targeted.

Back in the early 1980s, when distinguished Ireland international David O’Leary was playing for Arsenal, he persuaded his employers to set up a complicated arrangement involving a Channel Islands Trust and loans instead of a straight salary payment which would have been subject to UK tax. The Inland Revenue took the case to court and O’Leary lost his case.

Last year, the UK Supreme Court found that an earlier incarnation of Glasgow Rangers was using an offshore trust in a way not entirely dissimilar to the David O’Leary arrangement in a failed attempt to avoid tax.

It wasn’t just the UK Revenue which cried foul in this instance.

Arch-rivals Celtic FC were quick to point out that if the Rangers club was paying less tax than it should, that gave them an unfair advantage in the Scottish League, presumably because it would leave them with more money to pay players.

Celtic articulated what is an important justification for rigorous tax enforcement — failure to enforce the rules gives an unfair competitive advantage to the non- compliant over the fully compliant.

You don’t have to be in a sports club to see that logic.

Tax. It’s a funny old game.

Brian Keegan is director of public policy and tax with Chartered Accountants Ireland

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