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

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 think that an illeagle contract is uninforceable, so it would be null and void. Which could lead to chaos

Nothing I should think. A club can legally pay players for image rights and the gross amount is already counted on the salary cap. What all this is about is how much tax and N.I. is paid.

The player will simply be worse off as he must pay more tax and NI. The club will will also be worse off as they will have to pay more N.I. than it expected but it won't count on the salary cap because N.I. was removed from counting toward it a short while back.

Dave

I don't understand this point, particularly with reference to Wigan.

Wigan obviously want(ed) to spend more than the cap - why didn't you just use the NI dodge and put aside an equivalent amount in case HMRC came knocking? What difference does it make?

Wigan didn't spend more than the Cap! They broke the "Spirit of the Cap!".
Which in other words was we paid the players exactly the right amount in their wage packets to keep us under the cap but some of what they were due was deferred until the following year (Common practice in Aus I believe??) when they would be given a larger contract than they would have got normally.
As for your intent on implying wigan Want to spend more on the cap can you show me any evidence of this over the last 3 years considering our fine/points deduction (that IMHO shouldn't have applied either) was for 2006!

To get to the crux of your point!
I am Led to believe it was becuase the Employers (Whelan) felt that he may become accountable for the amount under paid retrospectively and he wouldn't do it!

So just put an equivalent amount aside at the time, what's the difference to a man & club who have lobbied for the cap to be raised in the past?

So like deferring payments then?

No, nothing like it.

Nothing is being deferred, you're just providing for a contingent liability. Difference being that you're likely not to have to pay it unless there is a retrospectively applied change in tax legislation, whereas deferred players' wages you most certainly would.

No its much worse it defrauding the tax man and some have ended up in prison for that.

Because he wanted to pay the players "X" Amount and that kept them under the Cap!

If he paid them "X+20%" via the Offshore method and then the Goverment came for that 20% He himself would have been liable for that amount not tha players!

You keep falling foul of the same old argument that we "Broke" the salary cap, we didn't.
"IF" Whelan wanted to pay the players more to get the Big stars here and "Break" the cap he could have done, he didn't!
He wanted to stay within the cap However the way he chose to do this was deemed against the "SPIRIT" and we got fined & Points deducted!
The way 10 other clubs have done it wasn't classed as against the "Spirit" but in my opinion was far more against the "SPIRIT" as Saints/Leeds for example won many trophies on the back of their players earning More than other clubs did, FACT!

Wigan paid their players for years 2006/2007/2008 exactly what they should have been and under/on par with the Salary Cap 1.6m. Other clubs didnt.
I know which one in the long run was more against the "Spirit"!

I'm not sure you understand what the word loophole means.

My point has nothing whatsoever to do with Wigan having ever broken the cap, but nice rant.

And if you do have to pay it are you going to accept that your players got paid more than Wigan players in 2005/2006/2007/2008?
Do you not accept that this should be classed as against the "Spirit of the Cap"????
Should SL Titles & CC be decided by who has the most creative accountant????

Just accept that not everything your club does is perfect & what we do is Bad!

So what has it to do with then????

You paid your players a certain way which meant you were able to roughly pay your players 15/20% more than what we could????

Please don't make it sound excusable because we all could have gotten away with it!
Whelan chose not to use the LoopHole and in hindsight seems to be right is doing so.

If both sides were spending up to the cap, the gross salary bill will have been exactly the same. The only difference will be in National Insurance deductions/contributions made.

If a retrospective change is made, we'll have to pay the bill, sure. But it was not contrary to any legislation at the time of payment and the RFL were aware of the practice and deemed that it was not contrary to the cap.