Love it....would that be another of Hudge's many job titles?

HMRC don't do precedents. That's why Leeds are having to fight a court case to try and get the same deal on image rights that RU clubs get.

Does this mean we actually made losses really for the last 6 years and not profits?

Why would it?

Because we've been using a tax loophole to reduce our outgoings

For a genius you do ask some stupid questions

I suspect its more likely that they've been using a tax loophole to boost the money going in to the players pockets rather than the actual amount being paid out by the club. If what I suspect has been happening is the case then technically what we have been paying to the players needs grossing up by the tax that has been "avoided" and we have probably been breaching the salary cap for the last x years.

I don't know anything about the image rights case but the Inland Revenue do have to treat all tax payers equally so effectively they do set precedents

Exactly. Player X, let's call him shaun, wants £150k a year but we offer £120k, a chunk of which goes into an EBT, saving him £30k in tax. We get our player for £120k and he effectively gets his £150k.

Sounds like we've been "saving" £200k+ a year for the last 10 years

Agreed although I suspect that the £2million being banded about by the press includes interest and penalty charges and in reallity the amount that has been avoided/saved is nearer the £1million settlement figure

I thought the amount you can pay into EBT is capped at about 25% of overall income?

As far as I am aware there is no limit on the amount that can be put in to an EBT arrangement. THere are issues with paying the money out and the tax consequences relating thereto but there are various schemes available to do this, particularly when it comes to none residents and my guess is that it is one of these that the club have been using.

Ah, right - thanks.

I've only eve looked at EBT in the footballinv world and I read that there was some kind of cap applied.

What does confuse me is that EBT is payment based around the profits a company/club makes agaisnt an employee. The word " profit" should automatically preclude 90% of SL clubs partaking?

Yes. However, not within the prevailing tax rules at the time.

Rangers football club are looking at £50m odd, apparently:
[urlhttp://news.bbc.co.uk/sport1/hi/football/14930737.stm[/url

The question that's unanswered is how many other clubs are affected; Smailes suggested it was loads, but I've not seen evidence of this, unless the whole thing unravels if/when the Rangers case reaches final tribunal in November and other cases emerge.

Rangers are going to go pop aren't they?

Hopefully

A loophole that's now been closed and is being charged retrospectively.
Do you even know the difference between evasion and avoidance? We never lied about anything, so the accounts showed profit.

For a fekwit, you don't disappoint.

Yup. Spot on.

But the RFL have never outlawed payments to EBTs or club-paid image rights, and indeed reference to both continues to be made in the Operational Rules, and to how they are treated for salary cap purposes. So its unlikely the RFL would succeed in arguing any retrospective cap breaches - in fact zero chance, since the RFL is effectively only the sum of the SL clubs anyway in matetrs such as this.

The effect of both (and of paying substantial pension contributions instead of salary) is to get you much more bang for your salary cap bucks - same spend by club gets much more money to players because of tax avoidance. Except HMRC seem to have successfully contended that these devices, used to "excess" as they argued they were (and rightly so IMO, despite me being a RL fan - sadly, I am also an accountant) amounted to tax evasion, not avoidance. Hence the big retrospective bills (doubtless including penalties and interest)

Someone above said HMRC do not establish precedents. That is totally wrong, as that is precisely what they DO do. And it is precisely what they are doing over club-paid image rights. The plan is to establish a clear precedent with Union, Cricket and RL, and THEN bring that to bear on the REAL target, which is soccer. There are hundreds of millions, probably BILLIONS of tax at stake here. And, with a bit of luck, the precedents HMRC have established will financially wreck that financially-rotten game, or at least drive out the crazy number of hideously overpaid foreigners who are paying far too little tax to the Exchequer. Sadly, setting the precedent is likely to do a great deal of damage to RL, and drive some clubs, especially those with no sugar daddy (and I fear possibly including my own) to the wall.

Completely agree with your sentiments on football, and like you fearful that we may be the casualties first. Would be very interested in seeing how many clubs have exposure and to what extent on both EBTs and image rights. It seems odd that as it stands Hull FC are the only team with declared liabilities re EBTs; can't imagine if guidelines on them are in the RFL's operational rules that we're the only ones using them.

This is all a bit scary. Could the short-term future of Super League itself be threatened before clubs are able to re-establish themselves?

I find it a little odd that the closing of a loop hole is being retrospectively applied.

Its widely known that St Helens were very creative in their approach to paying overseas players, they must be in to EBT's are a fair wack.

It does seem odd that it's legal to possibly cost businesses their very existence now for working within the laws correctly in past years.

It's almost like changing the speed limit on a stretch of road from 40mph to 30, then checking the film on the speed camera for the last 3 years and fining everyone who was legally driving at 40mph. Or am I oversimplifying? Was there perhaps a caveat in the tax law that warned this eventuality was always a possibility?

Are you serious that payments in the form of Pensions, EBT's and the whole myriad of other arrangements don't count on the salary cap - if so this makes the whole system pointless. Simply pay every player minimum wage and pay the balance into a proper EBT (not one set up for tax avoidance) pay the money straight out to the player (paying the proper tax on the way) and you will never get near the salary cap.
The point I was making earlier is that most of the £1million to the revenue is essentially extra payments on behalf of the players. It never crossed my mind that the payment in to the EBT didn't count on the cap if this is the case we may as well scrap the salary cap totally.

As regards the retrospective closing of loopholes I don't think this is the case. The clubs will have been aware from day 1 that the use of EBT's in this way is a high risk tax avoidance strategy. I think these schemes are notifiable to the Revenue under their "dotas" rules which should automatically put anyone using them on notice at the outset, what has happened is that the clubs (and to be fair a good number of other business's) have taken a risk which looks like its going to come back and bite them.

Think he's getting more at the fact that there is now an additional tax liability for each of the last 10 years. If I'm understanding right, technically it should belong to the players concerned, but we'll be footing the bill instead so it's additional PAYE to pay. The accounts for the last 10 years will therefore be restated with additional tax (i.e. wages) expenses, which may make the last 6 years' worth of accounts now show losses. I'm actually wondering if that's part of the way Pearson's negotiated the liability down, as there'll possibly be Corporation Tax payments to offset because there are no longer profits to tax.

So either the Revenue have been slack in validating the oeration of these schemes, or they've not been properly notified, then?

To be fair to the Revenue (not something I'm often accused of!) I don't think it's a case of being slack. The scemes are very complicated and all are slightly different. I think its a case of them trying to get everything in a row before they launch their attack. I doubt very much that they have not been properly informed or the directors would be looking at something a bit more serious than just settling the liabillity

But to say we would have made a loss is pointless, if we hadn't ran with this high risk strategy we'd have just budgeted differently, I'm sure.