I think applications have closed for the Salary Cap & Registrations Manager post at the RFL. Could have investigated from the inside!

loop hole or not,

is robbing from her majesty not in breach of the 'spirit of the cap'

or is that just reserved for when use loop holes?

This not a sentence.

Neither is that!

Lets face it it's hard not to be

Sorry missed out the capital and the word we.

Must try harder next time.

I didnt know if you were refering to wigan or saints or anyone else

Good point ( and grammar corrected to prevent the Saints fan from changing the subject).

When Wigan deferred wages all they did was adopt what was common practice in the NRL where deferment of wages has gone on for some time without punishment. Despite this Wigan were done for the "not in the spirit of cap" thing.

Using a different loophole to get around salary cap regulations is apparently OK. As you say how is this also "not in the spirit" of the cap?

What it shows is subjective catch all phrases like "not in the spirit of the cap" have no place in the regulations. They are lazy clauses open to interpretation.

That said the article was published on April 1st....

Dave

Acutually, this has potentially more far reaching ramifications, for example, say that a team who got a franchise based on not having broken the cap, has now been found to have broken the rules!

Sheffield United vs West Ham is case law for loss of earnings.

This could get messey.

Its published in print in todays paper and was uploaded at 9PM last night.

Why would they ask for all the 'lost tax money'
a loophole is not breaking the law until they close it.

So no-one has broke any law
what's the problem
it just means that in future people have to change the way they do deals

If any club were to be asked by those nice folk at HMRC, would that money come off this years cap.

If yes could that potentially lead to a breach and a point deduction?

I image rights themselves are covered in the salary regulations as part of what counts:

Image Rights Payments

5.6.7 the Gross value of all amounts that Accrue to the Player during the Salary Cap Year in consideration for the right to exploit commercially the Player’s name, image and/or other attributes in that Salary Cap Year;

What the Guardian article is suggesting is a form of tax and/or N.I. avoidance or that tax and/or N.I was liable on the image rights payments but not paid.

I am not sure if paying any such back taxes that are due would take a club over the salary cap for 2008.

I know N.I. payments were removed from the salary cap when it went down to £1.6M but not sure what year that was. Maybe 2007 or 2008.

So if a club had to pay more NI for a year [iafter[/i N.I. was removed from the gross salary cap, then I doubt they would have be considered to have gone over the cap.

However going back further and before N.I was taken out of the cap were the clubs were really liable to pay more N.I. than they actually did, I am sure this would have taken them over the cap. Saints spring to mind as they have always sailed close to the wind on paying right up to the cap.

The fact there has been a cloud hanging over these payments has been known for some time and is why Wigan (under Mo) chose not to do it. Whether IL has continued along those lines, who knows.

Busting the salary cap is one thing though. If any club did as a result of this then while we could claim the moral high ground, they can polish the trophies as I doubt they would be stripped of any titles as a result.

However what they may well be liable for is the back taxes and N.I. That could knock a serious hole in the finances of clubs and the Inland Revenue are not sentimental about this sort of thing. They will want the money.

It will also be interesting to see how some clubs who have a reputation for managing the cap better than Wigan do so when they have this to consider and it makes a mockery of claims that they did it better than Wigan. Yes they did, by avoiding tax and N.I.

Dave

Why? Because they can.

If the Inland Revenue judges you liable for more tax than you have paid they can go back several years and claim it off you. In the same way as if you paid too much you can claim it off them but only so far back.

What makes you think it was open in the first place? Some argue it wasn't.



If this is not an issue, why the article in the paper then?

Dave

My view was that if no law was broken why do the government think they are entitled to the money

It was a way around a law which isn't the same as breaking a law

The government repulse me

So was deferring players wages, so the RFL invented "the spirit of the cap" ruling.

Probably because they think the money was income and we are all taxed on our income.



Tax avoidance schemes rely on tax lawyers coming up with the scheme in the first place. They are not infallible so if they get it wrong, what is the problem with the government getting the money?

Clubs sought opinion from lawyers on this (I know this for a fact) and as a result some clubs decided to risk it and others did not. In other words it was not seen as a clear cut loophole in the eyes of some (I know that for a fact as well), there was a difference of opinion amongst the clubs and some clubs judged it too risky a thing to do. It looks like those clubs were right.



Why blame the government? It was the clubs that took the risk who are to blame especially when 4 of them were saying it was not a legal loophole. Hardly comes across as a black and white sure fire bullet-proof tax avoidance measure does it?

Dave

The rules make you wonder why this form of tax avoidance was not also judges not in the spirit of the cap:

"In matters of contention, the RFL will be guided by the treatment accepted by HMRC as to items that may be capital or revenue in nature. However, while this may assist the RFL in determining an issue, it would not bind the RFL, particularly where such a treatment may in fact be tax effective but, nevertheless, is in conflict with the primary purpose of the Salary Cap rules."

I don't see how using the tax system as with image rights is not in conflict with the primary purpose of the salary cap.

Dave

Being pedantic I know, but HMRC isn't part of the Government, it's part of the Civil Service, which in this country (unlike say, the US) don't get appointed by the ruling party of the day.

Never thought I'd read a debate about tax law & the Constitution on here - who says we're all thick Northerners!

Oh dear you don't understand do you? If they were paying money to an account in another country then they were not paying any income tax on it therefore tax evasion has taken place.

Your point about "a way around the law" is downright idiotic. That is like saying "i'm gonna go do 60mph in that 30mph limit because there's no speed camera to catch me" I'd be getting around the law, yeah but I'd still have broken it.

And finally the problem from a team's point of view is that paying money to these overseas accounts means that it didn't get contributed to the cap therefore they probably did break it after all and this means that teams have won competitions unfairly and teams have been excluded from the Super League franchise unfairly.

Do you understand now or would you require more explanation?

so instead of 'educating' me you'd rather ridicule me ?
i'd hate you to have been any of my teachers.
Forgive me if tax law is not one of my strong points

What about all the millionaires who all work in this country but pay no tax because of their 'address' being on the isle of man or the channel islands.
Are they breaking the law ? (that is an actual question not rhetorical)

It comes down to the old argument of tax evasion v tax avoidance. Tax avoidance is a legal method of reducing tax liabilities via methods which are not technically illegal but are loopholes or grey areas (being based in the Isle of Man is a good example - it happend a lot in the 70s with rock stars etc spending time abroad to avoid crippling tax bills - thats why a lot of 70s albums were recorded in foreign studios it counted as time abroad for tax purposes). Tax evasion is the illegal non-payment of tax.

Avoidance schemes are by their very nature subject to challenge and new schemes are being devised all the time - it is a sort of tax arms race.

(It is similar to the celebrity lawyers who defend big name clients in motoring offences and get them off on obscure legal technicallities)

HMRC routinely challenge such schemes through the courts or via changes to the law. If it turns out such a scheme is not legal then back payment of tax is a real possibility. In this case I would suspect a lot of RL clubs are worried and will be consulting lawyers and accountants in detail.

From what i understand on this last bit is if you live on the I.O.M, Channel Islands or Monaco then you cannot stay in this country for more than i think it is 60 days if you do your liable to England's taxation rules and you have to pay tax on your earnings. Also this is completely different than living in this country and having some of your earnings paid into an offshore account to avoid tax or sports cap rules.

That is a good summary. This has been going on for some years and I emailed the RFL about it quite some time ago. It all first became an issue when some footballer got divorced and the divorce settlement showed he paid about 10% tax on substantial earnings due to various tax avoidance schemes.

The RFL told me the clubs consulted tax lawyers and some decided having taken advice doing what is mentioned in the Guardian article was OK but some did not as they thought it would expose them to a future liability. Wigan were one of the teams who decided not to go this route.

Did clubs who went this route gain an advantage? Yes and in particular over N.I payments.

Until recently a clubs liability on the cap included any N.I. payments made. So if clubs were avoiding N.I. by doing what is mentioned in the Guardian article, they were at an advantage over clubs like Wigan who did not.

That changed recently and N.I. payments were removed from the cap and the cap dropped to £1.6m as a result I think in 2007. So what that meant was clubs no longer got an advantage from not paying the N.I.

When a clubs salary cap liability is calculated the rules state the RFL will be guided by the I.R but also say (more or less) just because something is legal doesn't mean it meets the objectives of the salary cap.

Now that to me says if you can come up with a tax dodge even if it is legal then the RFL may not view it as meeting the objective of the cap.

So why on earth did this image rights thing pre 2007 not fall foul of the "spirit of the cap" thing?

As to what it means now I think simply several clubs could find themselves with a big bill for unpaid N.I. contributions. Hopefully Wigan didn't give up on their stance and follow the crowd.

The problem is the RFL were prepared to let an uneven playing field exist. They basically left it up to the clubs to decide if they wanted to take the risk of a future tax and/or N.I. liability. They should have simply ruled clubs should not do this to ensure the level playing field they are supposed to be so keen on.

However had they done so I am sure those clubs that wanted to do this would have kicked up a fuss saying they were not doing anything illegal.

When you consider the clubs that have gone this route are supposedly those most in favour of the salary cap it is at the very least hypocrisy that at the same time as saying the cap is great they employ tax lawyers to get around it !!

Dave