HMRC under pressure to produce results of its football tax fraud investigation

The dawn raids of Newcastle United and West Ham United offices and shocking announcement by HM Revenue and Customs of a criminal investigation into tax fraud called to mind similar dramas 10 years ago, staged that time by the City of London police.

Following years of suspicion that the payment of bungs was rife in the multimillion-pound swirl of English Premier League clubs’ transfer transactions, the force entrusted with investigating high-level financial crimes famously conducted an early-morning raid on the home of the then Portsmouth manager, Harry Redknapp. The Portsmouth owner, Milan Mandaric, was arrested, as were David Sullivan and Karren Brady, the then Birmingham City owner and managing director, now fulfilling similar roles at West Ham. The offices of Newcastle United were raided in that operation too, as were those of Portsmouth and Rangers, and there was the sense, as on Wednesday, that the authorities were about to cleanse monumental wrongdoing lurking beneath the sheen of the beautiful game.

The final outcome from that first frenzy of excitement did not establish an encouraging precedent for HMRC’s sensational start this time. Sullivan, scathingly critical of the arrests and conduct of the police, and Brady were cleared of wrongdoing. No proceedings were taken against any club and Mandaric and the former Portsmouth chief executive Peter Storrie were cleared of tax evasion in 2011. The dawn raids finally produced the separate, famous trial of Redknapp and Mandaric on charges of tax evasion, on which in February 2012 the jury acquitted both men, who left the court free and the City of London police with nothing to show from their inquiry. Redknapp had even successfully challenged the legality of the search warrant, which he complained had been unnecessarily melodramatic, traumatic for his wife and excessively public.

Lee Charnley, the Newcastle managing director, has not only suffered a similar public exposure, arrested and his house raided as part of the investigation, but dragged through it just two days after the exhilaration of seeing his club promoted back to the Premier League. Even after Newcastle published a statement in the evening about the HMRC action, the club’s website continued to lead with a picture of delirious players celebrating the 4-1 victory over Preston which clinched promotion, and the headline “Going Up!”

As the thinness of the Redknapp prosecution was revealed in court 1 of Southwark crown court five years ago, the irksome thought grew that the City of London police might have had more to be occupying them, given the trillion-pound collapses of banks all around them, whose consequences are still being profoundly felt. HMRC works to its legal restriction that it cannot make public the tax affairs of any individual or organisation, and it did not disclose any details beyond the statement issued early in the morning, which was spectacular enough by its standards. Its officials had arrested “several men working within the professional football industry for a suspected income tax and national insurance fraud”. Its investigators, who numbered 180, had “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”. The authorities in France were also involved, had made arrests and searched “several locations” – sparking fevered speculation about who the targets might be and what the deals were.

Informed sources say that HMRC is intensely aware of the outcome for the City of London police of its 2007 investigation and that the flurry of activity seen on Wednesday would not be undertaken lightly. There is, as football managers such as Rafael Benítez and Redknapp say after early dramas in the football season, a long way to go yet. But similar pressures apply on HMRC to show some results at the end.

There is a strange contradiction in football’s modern relationship with tax, a distillation of the Premier League’s conflicted character in English public life. On the one hand, the clubs and league itself trumpet the prodigious amounts of tax they pay as a great virtue and contribution to the public good. There was even a formal “economic impact assessment of the Premier League” conducted by the consultants Ernst and Young of the 2013-14 season, which reported that £2.4bn had been paid in tax and £3.4bn contributed to the UK’s GDP. The legally compulsory payment of PAYE tax and national insurance on the galactic wages paid to Premier League players was presented as the people’s game doing its bit for the public purse in a time of post-financial-crash recession and austerity.

Yet at the same time there has been a constant dissatisfaction at HMRC, which has harboured a suspicion that clubs, players and agents can be reluctant payers of tax and users of ruses to avoid it. 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. Several clubs and the league itself have been involved in making settlements, and Jon Thompson, the HMRC’s chief executive, told the House of Commons public accounts committee that investigations were continuing into 43 players, eight agents and 12 clubs. Thompson said then that the legitimacy of image rights arrangements, which can involve players from overseas qualifying as “non-domiciles” and receiving their payments offshore, were “the most significant risk in football”. HMRC told the Guardian in November that it had been “successfully tackling tax risks in the football industry”, and in recent years had identified “more than £80m in additional tax payable from clubs, players and agents”.

That is a lot of money but, for all the scandal and enormous publicity which attaches to any action by law enforcement authorities against the football “industry”, it is a fraction of the £2.4bn which E&Y calculated the Premier League and its clubs do actually pay every year. The £5m which HMRC says is at stake in this headline-generating investigation amounts to a further fractional slice.

Public attitudes have greatly hardened against tax evasion by rich people and corporations during this time of poverty and cuts for many people but HMRC will know its incursions into football must produce results if it is not to be subject to the accusation that it might have had bigger targets in its sights.

The author: Michel THEYS

Michel Theys, a Belgian native, began his career as a civil servant, serving the public for several decades. After retirement, he shifted gears to follow his passion for journalism. With a background in public administration, Theys brought a unique perspective to his reporting. His insightful articles, covering a wide array of topics, swiftly gained recognition. Today, Michel Theys is a respected journalist known for his balanced and thoughtful reporting in the Belgian media landscape.

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