: Fri Apr 03, 2009 10:45 am  

Rogues Gallery wrote:

As I said previously, I really can't wait for the ever so self righteous Mr. Hetherington to put out his statement.

You can't can you.

If i were you I'd take a cold shower and put the box of tissues down because you're not at that golden moment yet, and may never be.

: Fri Apr 03, 2009 12:50 pm  

Rogues Gallery wrote:

But it is against "the spirit of the cap" isn't it?

I wonder what will happen to the players who are STILL under contract to a club who have image rights and offshore accounts as part of their current contracts.

I can't wait to see the pompous Mr. Hetherington squeal.

GH by plenty!!

: Fri Apr 03, 2009 1:03 pm  

rhinoms wrote:

:lol:
GH by plenty!!

there's a horse running in the National called Offshore Accounts. It's gotta be a sign>

: Fri Apr 03, 2009 1:04 pm  

finglas wrote:

there's a horse running in the National called Offshore Accounts. It's gotta be a sign>

Owned by Mr P.Caddick and trained by Mr G.Hetherington.

: Fri Apr 03, 2009 4:32 pm  

Adeybull wrote:

Defo against spirit, and likely the letter, so the charges of cheating would still be made by fans of clubs not implicated. But I tend to agree with you - its not as if the SC auditor was unaware of the payments so the RFL would find it hard to impose retrospective penalties - even if they were minded to.

I suspect the real implications will be retrospective tax bills and tax penalties for clubs involved, higher costs in the interim "messy period", as you say, and then reduced packages available for overseas superstars for the future which may well reduce their flow from the NRL.

I'm not sure you're right! Surely the cap total is based on the combined value of the players contracts with nic and paye worked out as a portion of that rather than an additional amount! What clubs have done is pay less page and nic allowing them to pay a higher proportion to the player but no higher overall amount a £200k contract is counted as £200k towards the cap regardless of whether £1k or £10k is deducted from the players wage for tax, the clubs haven't paid out more simply changed the ratio of what goes to the player rather than the tax man!

The only instance I can see the cap involved is for retrospective payments being demanded for players still at those clubs as players need to be registered at the time of payment to be counted on the sc, even then I think the rfl would struggle to enforce that as it isn't a payment to the player but the tax man

Also I'm pretty sure the nic part of it is irrellevant as nics were removed from the cap when it went down from 1.75m to 1.6m so any additional payments of ni wouldn't count int the cap anyway

: Fri Apr 03, 2009 5:05 pm  

SmokeyTA wrote:

I'm not sure you're right! Surely the cap total is based on the combined value of the players contracts with nic and paye worked out as a portion of that rather than an additional amount! What clubs have done is pay less page and nic allowing them to pay a higher proportion to the player but no higher overall amount a £200k contract is counted as £200k towards the cap regardless of whether £1k or £10k is deducted from the players wage for tax, the clubs haven't paid out more simply changed the ratio of what goes to the player rather than the tax man!

The only instance I can see the cap involved is for retrospective payments being demanded for players still at those clubs as players need to be registered at the time of payment to be counted on the sc, even then I think the rfl would struggle to enforce that as it isn't a payment to the player but the tax man

Also I'm pretty sure the nic part of it is irrellevant as nics were removed from the cap when it went down from 1.75m to 1.6m so any additional payments of ni wouldn't count int the cap anyway

Wrong though. Example:

Club A is up to the salary cap. It pays its top overseas player £200k p.a., all as salary. Player receives say £130k net of tax (very roughly, ignore NIC for now...will come back to that - keep it simple)

Club S is also up to the salary cap. It pays its top overseas player though only £37k p.a but also £100k as image rights, using the Singapore Parachute device to avoid UK tax. Player receives £30k net salary plus £100k image rights = £130k net of tax.

In both cases player receives the same. Except that the cost to the club, and the cost ranking under the salary cap (again ignoring NIC to keep it simple) is £200k for club A and only £137k for Club S.

Club S therefore has an additional £63k of salary cap space free compared with club A - yet they both have identical squads!

NIC DOES matter because employees' NIC is treated same as tax - although its capped at the upper earnings limit so you'll be talking only modest numbers here. Employers' NIC used to count under the cap until they recently reduced the cap but also eliminated employers' NIC from the calculation. Otherwise, like tax, using the image rights/Singapore Parachute device saves the club money for the same player value.

Surely now you can see that the effect of what Club S has done is to free-up a load of salary cap - which can then be spent on either more players, better players or bigger packages to overseas players to entice them away from signing with club A. And no doubt clubs like club S would indeed spend that "extra" salary cap money.

Which might, just might, help explain why certain clubs appeared to get rather more bang for their salary cap bucks?

Except that it looks like the device has now been killed off, AND by the looks of things not just going forward but back into previous years too.

What it would mean is that, for club S, the £100k image rights would be treated as being a net payment and the gross payment - i.e. as if it was salary, and on the same basis as club A, would be £163k. The club would have to account to HMRC for the £63k extra tax. And the cost of that player for cap purposes rises from £137k to £200k.

Which is a bit unfortunate for club S, because they were at the cap already so they are now £63k over the cap.

Thats quick and simplistic, as the underlying tax issues are rather more involved than that and I've deliberately ignored NIC, but I hope it serves to demonstrate WHY this matters in respect of the salary cap?

: Fri Apr 03, 2009 5:32 pm  

It's a good job Leeds always keep some wriggle room beneath the cap level, just in case....

: Fri Apr 03, 2009 5:36 pm  

batleyrhino wrote:

It's a good job Leeds always keep some wriggle room beneath the cap level, just in case....

It may be very significant that Stains have apparently indicated they are not spending to the cap this year (thus far) according to Chair Maker, who I think reached a similar conclusion.

: Fri Apr 03, 2009 6:00 pm  

Adeybull wrote:

Wrong though. Example:

Club A is up to the salary cap. It pays its top overseas player £200k p.a., all as salary. Player receives say £130k net of tax (very roughly, ignore NIC for now...will come back to that - keep it simple) ........
Thats quick and simplistic, as the underlying tax issues are rather more involved than that and I've deliberately ignored NIC, but I hope it serves to demonstrate WHY this matters in respect of the salary cap?

That's an odd way of looking at it Adey.
Would you say the same about a club using the ability to avoid income tax on salary allocated to a pension fund vs a club not putting any into a pension fund?
It's the same principal.
What we really have is whichever club offers the player salary x. Then can do some work to help the player avoid paying tax. Whether that be putting some of it through offshore image rights, or into a pension pot or whatever. Remember, this has to be with the co-operation of the player - if it's going into a pension fund or into image rights, he doesn't have immediate access to that part of his pay.

: Fri Apr 03, 2009 6:40 pm  

Richie wrote:

That's an odd way of looking at it Adey.
Would you say the same about a club using the ability to avoid income tax on salary allocated to a pension fund vs a club not putting any into a pension fund?
It's the same principal.
What we really have is whichever club offers the player salary x. Then can do some work to help the player avoid paying tax. Whether that be putting some of it through offshore image rights, or into a pension pot or whatever. Remember, this has to be with the co-operation of the player - if it's going into a pension fund or into image rights, he doesn't have immediate access to that part of his pay.

Can see the point you are trying to make, but you look to be missing the point (or we are at cross purposes), and the distinction between "avoidance" and "evasion" which is central to this issue.

Paying a player part of his package in the form of pension contributions is tax-efficient and sensible for all concerned, if the player is happy with it. The contribution still counts under the cap, but but the NI savings (there is no tax saving compared to if the employee made his own pension contribution out of salary) would mean you could offer the player a slightly bigger overall package for a given cap spend, or free up a little cap space. (Lets not worry about the "salary sacrifice" rules here)

That's all fine and legal - although potentially of limited benefit to overseas players. The treatment always complied with tax legislation, and the treatment under the cap was always consistently correct.

It would also be fine and legal - in just the same way - if it had always been clear that paying Image Rights on a deferred basis using the Singapore Parachute was legal. If HMG (HMRC could not do it in those circumstances) subsequently decided to tighten up the rules, that would not change the fact that the payments made till then were fine and legal. Genuine tax avoidance to help both player and club.

And in that situation, we would not be having this discussion

But lets start by looking at a situation where the club paid pension contributions for the player which fell outside the rules for tax-eligibility e.g. because the % was too high or the recipient scheme was not tax-approved. In both example cases, the employer is liable because they are responsible for ensuring compliance with the tax rules. In such cases, the result would be that the player's pension scheme received a rather lower net amount (or the employee pays more tax), and so the player loses out. If the player is happy with that and/or bound contractually to accept that, then fine - no salary cap issues, just a hacked-off player.

But otherwise, to get the player back to the package you contractually agreed you'd have to pay more into the pension (or as salary). Which would increase your spend under the salary cap.

Moving on then to the similar situation of paying a player part of his package as Image Rights tax-free, where under the existing legislation such payments should not have been made tax-free. In that situation, the tax treatment was never in compliance with the tax legislation, and additional tax and NIC (as well as penalties and interest) will have to be paid - by the employer as it was its responsibility. Now the employer COULD seek to recover the tax and employees NIC from the player, and so (like the second pension example above) the player loses out. And again, if the player is happy/stuck with with that then fine - no salary cap issues (not strictly true because of employers' NIC in earlier years, but let that ride)

But again, if the player is not happy with that (and its unlikely he would be unless he agreed to bear the risks of possible tax claims when contracting with the club - always a possibility, albeit useless agent!) then the club would have to increase his salary or image rights to compensate. Which is what the club having paid the player's additional tax and NIC amounts to. And again, in that case it has increased your spend under the salary cap.

Hope you can see the difference? legitimate tax avoidance is fine, but what amounts to tax evasion will mean a grossing-up of whats been paid to/for the players and that will mean extra spend under the cap. Whether its through non-qualifying pension contributions, taxable image rights payments paid free of tax, or whatever.

All this issue hinges on whether there is a tax avoidance loophole which is being closed - and that would require legislation - or whether its evasion of tax/NICs under existing legislation, in which case HMRC are empowered to recover the tax and NICs so evaded. The fact that its HMRC alone dealing with this, and the reporting (consistent with my understanding) that HMRC are seeking to recover tax and NICs for prior years, rather suggests the latter.

Hope this clarifies a bit more?