It is not every day that HMRC raid premises so today is quite exciting. Newcastle United and West Ham United’s grounds have been raided in a football fraud investigation.
For those who follow corruption in football, you may recall that not long ago FIFA officials were investigated over bribes which were allegedly hidden using shell companies. Bastian Obermayer and Frederik Obermaier, responsible for The Panama Papers, researched the information leaked from Mossack Fonseca and found several shell companies allegedly owned by Jinkises. They found contracts regarding Ecuadorian TV rights to the UEFA Champions League, which appeared to not be commercial i.e. rights bought cheap and sold for massive profit with alleged “incentive payments” to senior officials. Obermayer/Obermaier also suggested that they had received information on the use of image right structures by clubs and players. The types of structures put in place sought to create a separate legal right for image, which could then be parked either directly or through an arrangement into an offshore structure. The income from the image rights would then flow to an offshore company. Some arrangements would permit access to that income through loans or other arrangements.
The structuring of image rights has long been an area of tax planning for sportsperson and performance artists. However, whether a structure established by following advice is effective relies on technical arguments which broadly means there are counter technical arguments. These arguments are generally heard by the courts. The courts are currently finding in HMRC’s favour, which may be a result of the political pressure to counter the use of offshore tax havens. Those structures where advice was not provided are likely to be the simple use of one or more offshore shell companies – Lionel Messi used a BVI company and was prosecuted by the Spanish tax authorities. Given that the new offshore criminal offence is now live, those using these types of structures need to be comfortable they work. Information is flowing from offshore to tax authorities around the world and it is a matter of time before those exploiting rights (image or even intellectual property) get looked into.
We specialise in managing tax risks and can help identify risks, mitigate risks, prepare clients as well as assist with regularising tax affairs.