English football cautioned on player tax dodging

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English Premier League clubs have been warned that they risk prosecution in suspected tax evasion cases under the UK's new Criminal Finance Act.

Tax specialists say that under the new law, which came into force on September 30, any company, including football clubs, can be held responsible for their employees or agents breaking the law by making payments to corporate vehicles that have been set up to evade tax.

The new legislation places the onus firmly on clubs to carry out due diligence on players and agents, said Tom Shave, partner in business tax at Smith & Williamson, the accountancy, investment management and tax group.

Many football clubs are reportedly unaware they could be hit hard by the criminal finance law. /File photo via AFP

"If a case goes to a jury, the reputational damage is already done. Being seen as a facilitator of tax evasion in the current environment is viewed dimly," Shave told AFP in an interview at the firm's city headquarters.

"It depends how the English Premier League see it if you have a criminal prosecution in relation to your activity.

"This criminal prosecution for tax evasion remains to be tested as it has just come in but you would imagine there are implications for a club should such a case proceed."

Peter Fairchild, also a partner at Smith & Williamson, which has a long list of top level footballers as clients, said the EPL might take a very dim view if one of their members was found to be guilty of facilitating tax evasion.

"The Premier League will want to maintain its reputation with fans and sponsors," he said. "We've seen point deductions where clubs have entered administration and parallels can be drawn."

Chelsea players celebrating after winning the Premier League at Stamford Bridge in London on May 21. /Reuters Photo

"The club in question will not have planned for this and as a result will suddenly see cash payments to them being withheld which will strangle cash flow and their players needing to be paid each week."

"No short cut"

Fairchild said many clubs don't seem yet to be aware they could be hit hard by the legislation. "It is seriously scary the criminal element of the legislation," he said.

"I am a bit surprised we haven't had more inquiries. Many clubs are only just getting to grips with the problem, perhaps thinking that it doesn't apply to them or that there is a shortcut."

"But there is no shortcut. (The tax authorities) will come and ask their questions and if you don't have a robust defense the weight of legislation will be used against you."

Fairchild sees the forthcoming transfer window in January being even more hectic and intense with the new legislation having come into effect.

/VCG Photo‍

"When it comes to January 31, those clubs that are struggling, or trying to get deals done, won't want to be told have you taken the time to go through the proper process and complied with the check list regarding the player they are targeting."

"The only thing a Premier League club, battling for survival, will want to do is buy a key player and preserve their EPL status."

"The prepared clubs will be asked key questions such as 'have you done this due diligence?'."

"They'll speak to external parties and potentially hire additional staff. Those clubs who don't take it seriously could find themselves facing an HMRC (Her Majesty's Revenue and Customs) investigation in a year or two."

"If that investigation finds problems then they could suffer an unlimited fine."

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Source(s): AFP