Apologies for messing the quote system up!

His question was no more pointless than any other post on the thread.

And you asked why would this new liability mean we made losses instead of profits, so I just gave you a possible explanation.

I know Leeds have used EBTS, because they said so in the contingent liability note in their accounts. I know Bulls have NOT. Beyond that, I don't know.

The bigger exposure for the game is club-paid image rights. Most clubs are up for those.

EBTS and club-paid image rights and pension contributions DO count under the cap. The issue is that, using these, you can get a lot more net income (or equivalent) to a player for the same gross cost to the club (remember too that salary attracts employers' NIC, which is also avoided - or evaded -using these devices.

My argument for some years has been that club using these devices "to excess" - for example, paying over half a non-marquee antipodean player's package as image rights - has been effectively breaking the cap, since if - when - challenged by HMRC, if ANY amounts are "grossed up" - i.e. taxed as if they were net salary payments - then the amount of the grossing-up should be added to the cap spend. It won't happen, of course.

But, perhaps in an effort to evade the salary cap more than tax, the consequence has been to antagonise HMRC sufficiently for them to seek to tackle this issue once and for all. Although, as I said, RL is a mere fleabite to them compared with Soccer. RU reached an agreement a bit ago.

Unfortunately, RL as a game is skint, and most RL clubs are either skint or would be were it not for (or had it not been for) the support of their rich owner. A select group you guys have just joined - good luck to you. We will not be so lucky, and face a future that is at best uncertain.

Consequently, these large bills for back tax - and we were told a few days ago at a fans' forum, in response to questions I asked, that our club HAD agreed a settlement with HMRC over image rights - will either be picked up by the rich owners, or if no rich owner then God knows how they will be paid. At best, by condemning the clubs affected to continuing mediocrity for the foreseeable future.

It seems to me that all the clubs using these devices to excess did so in the knowledge that the principal effect was to avoid (or evade) tax and NIC, and therefore these devices were open to attack. Therefore it is hard to take issue with HMRC. Yet, if you were a club board seeking to build the best squad you could, and you saw other clubs seeming to be getting a lot more bang for their salary cap bucks, what would YOU do? Even if you were concerned that it could all go tìts up if or when HMRC got their teeth into it?

This whole tax disaster is a consequence of both having a salary cap AND a game that is desperately short of funding.

As for the comments about would you have made a loss had you not used EBTs? If you were spending to the cap, then only to the extent of any employers' NIC that you would otherwise have paid (which these days is outside the cap BECAUSE of all the avoidance devices) since you could not have paid any more in total than you did without exceeding the cap. The difference is probably that you would not have had such a good - expensive - team.

Cheers for that. It's good that at least Bradford have addressed and are transparent about the image rights issue. I worry that we have the same issues in addition to the EBT but on the other hand Pearson's said he was aware of the EBT stuff before the acquisition, so would imagine that if there's any image rights stuff kicking about he'll have taken that into account too.

This is what I'm trying to say, we'd have just pulled the difference back.

I think Jake is maybe making a different point to what you and Adeybull are responding to. I suspect he was not saying we would have made a loss at the time if the rules had been as they are now saying they are, he was asking if the resulting restatements from this situation mean that we have retrospectively made losses instead of profits. Obviously Jake would need to confirm if that is what he was getting at.

Is your masters in dummy spitting?

Had the tax and NIC been recognised in the years that it related to, then the profits for those years would have reduced by those amounts. BEFORE tax profits, since the employers' NIC is a cost of the business and the grossing up for tax and employees NIC would have been treated as part of player salaries.

Any interest and penalties would NOT have been reflected in those years, since they would not have arisen, although there would have been interest costs elsewhere as a result.

saints, wire and leeds must have hammered them

No, you're saying that hypothetically, the club would have remained within budgets for the years in question had they known that this would blow up in the future. My point was that they have paid the players in this way and that the resultant tax liabilities have to be paid and mean that for the years in question we have effectively probably made losses.

That's exactly what I'm saying. I'm talking hard facts, not hypotheticals

I think that's exactly the point he is talking about. Have the financial statements been/will they be restated to reflect the fact that we may have effectively made losses for those years now?

Doubtful, but it will be interesting to see how the 'lump sum' is treated in this years accounts.

Why doubtful?

Pointless exercise, mainly. As long as everything is sorted and paid up I don't see a need for any previous set of accounts to be altered.

I can think of two possible reasons. 1) For consistency, previous years may be restated for the comparative liabilities. 2) As I alluded to in a previous post, it may be more efficient for corporation tax to restate every year rather than just write the loss this year back as far as possible or carry it forward.

Can't find anywhere that states accounts would have to be amended. Not saying you don't, mind.

I'm not saying they have to be, just wondering if there's a possibility it might be beneficial to.

In what respect? Corporation tax? It all goes to the same guy, I'm sure all that was taken into account in the settlement. Seems the logical thing to do.

Its not a case of what you would LIKE to do - it is what you are REQUIRED to do that matters. You are only allowed to restate prior year accounts for two reasons:

1 - Change of accounting policy
2 - Correction of fundamental error

Normally, if one or the other applied and the affect was very material, you would have no choice BUT to restate.

I suggest the EBT settlement is neither of these. It arose from a major error of judgment by the then-directors. There MAY be an argument that it was a fundamental error, but I'd not buy that.

Cheers, I'm a little rusty on the rules for restatement. I knew there was a requirement for a change of accounting policy, wasn't sure if there was a similar one for a change of legislation/accounting treatment rules, which it may come under.

Yes, corporation tax. More about the rate at which it was paid. If all periods were now a loss it would probably make no difference, but if in some years it just reduced the profits to pay tax at a lower rate, it would probably save money.

The HMRC have an arrangement with RU clubs that offsets a certain amount of the image rights payments that are now due. They have not offered RL clubs the same 'discount'. Hence the court case by Leeds which is being supported by the RFL. So maybe the HMRC have a different definition of 'precedent' to everyone else?

or maybe the RU clubs have better lawyers than the blazers from Red Hall?

amazing, isn't it, that Football, Formula 1, Tennis, Cricket, Speedway...(I wont go on) don't seem to have an issue with EBT??

I'm not sure that they don't. It might simply be, as Adeybull has said, that HMRC are going after the 'soft target' of RL in order to get a firm precedent set through the courts and [ithen[/i go after Soccer et al.