: Thu Apr 02, 2009 10:29 pm  

expatrhino wrote:

Surely if it's a loophole that is being closed means that it is a legal payment that the government is now stopping. If it was illegal it would be tax evasion and would be much more problematic.

I agree mate but the power's that be are clearly looking to close it and then try and "claw" back what they can,this in turn will apparently have an impact on that year's SC.

: Thu Apr 02, 2009 10:31 pm  

expatrhino wrote:

Surely if it's a loophole that is being closed means that it is a legal payment that the government is now stopping. If it was illegal it would be tax evasion and would be much more problematic.

If they treat it as an avoidance loophole that's now being closed, then I agree. Indeed, that may happen.

But my understanding is that HMRC are treating this as evasion, in which case back-tax, interest and penalties will apply.

Good point though...until we know more of the facts it could be either, and if the former then it will only affect clubs going forward and will not raise historic salary cap issues unless (like Bulls were with Harris) there are contractual commitments that trigger a future breach.

: Thu Apr 02, 2009 10:46 pm  

rhinoms wrote:

Lyndsay still managed to squirm out of the worse of it though because the new punishment's were being introduced but wigan avoided it because some paperwork hadn't been filled in properly.

Cr@p

Mo Lindsay argued that in the first instance Wigan couldn't be punished for a rule that was retrospective.

He won that battle.

But to appease the masses they found Wigan guilty of "breaking the spirit of the cap"

Now what is different this time, or are Leeds bums twitching?

: Thu Apr 02, 2009 10:51 pm  

Adeybull wrote:

If they treat it as an avoidance loophole that's now being closed, then I agree. Indeed, that may happen.

But my understanding is that HMRC are treating this as evasion, in which case back-tax, interest and penalties will apply.

Good point though...until we know more of the facts it could be either, and if the former then it will only affect clubs going forward and will not raise historic salary cap issues unless (like Bulls were with Harris) there are contractual commitments that trigger a future breach.

I can't see how they can treat as evasion if it WAS a legal loophole that they are now closing and now making illegal

: Thu Apr 02, 2009 11:10 pm  

Adeybull wrote:

Sorry Gareth but you have missed the key point here.

If (and I stress if) clubs are found by HMRC to have made payments to players free of (or at reduced rates of) tax or NIC, and IF it is determined that tax and NIC has been underdeducted and paid as a result, THEN the clubs will be required to account for that tax - plus interest and penalties - to HMRC. Likely going back six years.

That's bad enough.

But the really interesting issue is the effect on compliance with the salary cap. Because its the grossed-up amounts that would rank under the cap, not the net amounts actually paid. Which for clubs involved could well mean an immediate and retrospective salary cap breach for anything up to six years.

Its all hypothetical at this stage, as no-one has yet admitted to having had to settle with HMRC over this issue, but it does seem to be widely understood that HMRC HAVE been investigating these practices and that such practices HAVE been taking place.

The response of the RFL regarding retrospective SC breaches should it transpire that clubs DO have to settle with HMRC will be...interesting.

I am aware that the government is closing a lot of tax avoidance loop-holes at the moment. Its' quite amusing as I am suing a millionaire who instructed a trust company to set up an off shore loop-hole which they did, for a very large fee. Very shortly after the government closed the loop-hole meaning he'd wasted his time, and money. The millionaire doesn't want to pay my client. He will do though

I don't for one second think it was evasion so I don;t think any of the clubs have any real worries. Just my opinion though.

If, however, by some perverse logic it is found to be evasion (and remember its not evasion because the tax authorities say it is) I think it would be disproportionate, unjust and a waste of time and energy to gross up any penalties and back tax onto previous years salary caps.

All business should look to minimize their tax liabilities and optimise their business where possible. It would be wrong to penalise any clubs that had been doing this.

Like I say though, this all assumes it was evasion and at the moment that is not the case.

: Thu Apr 02, 2009 11:35 pm  

G1 wrote:

If, however, by some perverse logic it is found to be evasion (and remember its not evasion because the tax authorities say it is) I think it would be disproportionate, unjust and a waste of time and energy to gross up any penalties and back tax onto previous years salary caps.

If it WAS evasion, then in terms of the salary cap it could only be the grossed-up back tax and NIC that would count anyway. Not any penalties or interest.

Regarding whether it would be unjust (in those circumstances) to re-open prior-year salary cap reviews: IMO the RFL would HAVE to. Clubs that indulged in these schemes did it in the full knowledge that they might be challenged. They took a calculated risk. Other clubs did not. Those that did will have received the rewards in terms of having more bang for their bucks. They can gave no qualms if it transpires that in doing so they cheated both the British taxpayer and the salary cap, and should pay the price accordingly.

If the RFL did NOT reopen, the would surely face action from clubs who either did not engage in this activity, or who broke the cap for other technical reasons and were rightly punished accordingly?

All those who have played merry hell on here for years about the Bulls' having "cheated" to win the 2005 GF could have no arguments in acting the same if it transpired that other clubs (and tbf I'd be pretty surprised if Leeds was one, unless anyone knows otherwise?) had done likewise?

G1 wrote:

All business should look to minimize their tax liabilities and optimise their business where possible. It would be wrong to penalise any clubs that had been doing this.

If it IS ruled to be evasion, then you as a lawyer could surely not condone it as your comment appears to suggest you do? You believe it would be wrong to penalise a club engaged in tax evasion? (If, indeed, that's what it was).

G1 wrote:

Like I say though, this all assumes it was evasion and at the moment that is not the case.

My understanding is that HMRC are pursuing this issue - and it started with soccer IIRC - on the basis that tax was evaded not merely avoided.

This is alluded to in the Grauniad article - e.g. "...and there are suggestions that they may be forced to make retrospective payments which in a couple of cases could run well into six figures."

If, though, it transpires that all HMRC can demonstrate is avoidance using a loophole that they - or the government - subsequently close, then yes its not a historic salary cap issue, and I agree with your previous comment as applied to tax avoidance (as opposed to evasion). And yes, it that case affected clubs would have little to worry about historically, although rather more to worry about going forward especially where they cannot get out of any contractual commitments to pay x amounts free of tax

: Thu Apr 02, 2009 11:38 pm  

expatrhino wrote:

I can't see how they can treat as evasion if it WAS a legal loophole that they are now closing and now making illegal

Agreed. See my comment to Gareth above.

: Fri Apr 03, 2009 7:58 am  

I'll say we'll be alright, especially if the clubs auditors haven't picked up on this and haven't already said anything to HMRC.

: Fri Apr 03, 2009 8:05 am  

kendall17 wrote:

I'll say we'll be alright, especially if the clubs auditors haven't picked up on this and haven't already said anything to HMRC.

Doesn't quite work that way, cos it looks like the clubs that availed themselves of this took a calculated risk, probably working WITH their tax advisers who usually tend also to be the auditors. And the auditors would not report something of this nature to HMRC - there are pretty limited circumstances in which they have an obligation to report things, usually involving money laundering.

I'd still be surprised if it affected you though, and anyway you have other safer opportunities for stretching the cap if you need to.

: Fri Apr 03, 2009 8:28 am  

Had a word with the gaffer this morining, HMRC are investigating the amounts we pay our players for their image rights. HMRC want 15% of the players salary to become their image rights (exempts from PAYE&NIC) so obviously we pay them more and they want us to pay nic & paye on the difference between the current image rights percentage to one that has been agreed by the club and the revenue. A deal could be done with the revenue & the clubs to go back a certain number of years.