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Although other disciplines might dispute the fact, football has long been regarded as the UK’s dominant sport.
The attention devoted to it by players, press and public alike has only increased over the 25 years since the creation of the Premier League and the riches – more than £5 billion over the course of the current deal (http://www.bbc.co.uk/news/business-31379128) – generated by television coverage.
Such income has not only attracted audiences and tempted some of the game’s stars from other national leagues. Perhaps unsurprisingly, the tax authorities have been keenly scrutinising what happens to all the cash.
It seems that they are particularly interested in how soccer’s talent is rewarded. That line of enquiry ultimately led to the liquidation in 2012 of one of British football’s biggest names – Glasgow Rangers – following a demand by Her Majesty’s Revenue and Customs (HMRC) for tax which it believes was owed on vast sums routed through devices known as Employee Benefit Trusts, or EBTs, for short.
The Trusts have been used for a number of years and had allowed companies to transfer sums into them so that staff could take tax-free loans.
Whilst the passions aroused by opinions on football sometimes give way to hyperbole, the description of this dispute as “the big tax case” is no exaggeration whatsoever.
That’s not just because – to use a sporting analogy – administrators handling Rangers’ demise have so vigorously contested HMRC’s actions that they lead 2-1 by virtue of a brace of victories in tax tribunals before a reverse in the Scottish Court of Sessions last year (http://www.bbc.co.uk/news/uk-scotland-glasgow-west-34964491).
What is so significant is what may happen as a result of another stage in the exchanges. Both sides’ arguments will be aired in a two-day hearing at the Supreme Court next week (https://www.supremecourt.uk/cases/uksc-2016-0073.html).
Even before that case kicks off, though, football clubs have been trying to anticipate the outcome and avoid a similarly dire situation by reaching settlement with HMRC over their own use of EBTs.
As I’ve been telling The Times, a number of clubs have paid the Revenue in order to avoid being taken to court.
They realise that the Rangers case is just one part of a broader HMRC campaign to clamp down on the abuse of EBTs by all commercial organisations, not just football clubs.
It has increasingly come to view the Trusts as a means of companies remunerating employees without paying Income Tax.
One indication of the consideration of EBTs came in December 2010, when HMRC introduced rules treating any loans made from them as taxable income.
Additional powers are expected to be given to HMRC this summer. Under the terms of the Finance Bill currently making its way through parliament, individuals who have not repaid their EBT loans by April 2019 will be required to cough up Income Tax on the outstanding amounts.
Given the sums involved and the fact that some beneficiaries may have retired from their well-paid careers, there is the possibility that individuals may be placed in acute financial difficulties as a result of any such tax demands.
Much hinges, therefore, on what the five Supreme Court judges deliberating on the circumstances of Rangers’ collapse decide but, even without their conclusions, many of the Premier League’s premier names are being forced to confront how they achieve success on the pitch while keeping their star players and the taxman happy too.