Arsenal get £11m tax-dodge bill
The Sunday Times October 09, 2005
Robert Winnett
ARSENAL football club has been hit with a bill of nearly £12m after an investigation into a tax dodge used on payments made to players and agents.
The north London club is set to be the first high-profile victim of a campaign by HM Revenue and Customs (HMRC) against tax avoidance in the game.
Arsenal set up a series of front companies and offshore trusts to reward its stars and save millions in tax every year. On average, players were left paying about half the 40% tax rate for high earners.
The scheme, revealed in The Sunday Times last year, is now considered illegal by HMRC, which is demanding at least £11m back tax.
Payments of more than £4m to agents have also been ruled not to be an “acceptable business expense”. Arsenal must pay an extra £700,000 Vat on these.
Premiership sources fear that the actions by HMRC — a merger of the former Inland Revenue and Customs — will make it harder to attract top foreign players to Britain when they can still benefit from tax-free payments abroad.
Thierry Henry, Arsenal’s star striker, has disclosed that he will not begin negotiations for a new contract until next summer, prompting fears he will quit England.
Peter Hill-Wood, the Arsenal chairman, said: “The Revenue are crawling all over us. We thought we acted perfectly legally . . . but now maybe the rules have changed. We are not the only people who have been doing this. It’s obviously not helpful [in retaining the services of top foreign players].”
The club’s tax dodge was revealed in documents detailing the divorce case of Ray Parlour, a former Arsenal midfield player, who was forced to disclose his salary details to the courts. It showed he earned a pre-tax package of £1,557,267 for the 2001-2 season on which he paid £350,000 tax, a rate of just 22%.
In its forthcoming annual report, Arsenal will detail the £11m it has put aside to cover the payments. Hill-Wood said he believed HMRC was also investigating individual players. It is not clear if the club may be forced to pay any extra tax they owe to stop an exodus of its stars.
It is understood the tax investigation has been discussed by Premiership clubs, which are considering whether to make formal representations to the Treasury. A spokesman for the league said he was aware the Revenue had been probing Vat relief on agents’ fees and tax savings on players’ wages.
Top Arsenal players usually sign two contracts. The first pays them an annual basic wage mostly taxed at the higher rate of 40% plus National Insurance.
However, they also have a second “shadow” contract for performance-related bonuses that reward success on the field. These can account for up to half the total pay package and are paid via two offshore front companies that accountants say enables foreign players to avoid almost all tax.
As a result, Henry is estimated to have saved almost £70,000 a year, Arsene Wenger, the manager, about £118,000 annually, and Dennis Bergkamp more than £45,000. British-born players were able to cut their tax rate from 40% to 25%.
Middlesbrough and Leeds United have also previously used employee-benefit trusts to reward players.
I think this is the same 12Million they got for Patrick LOL
Spurs eye success as profits soar
Chairman Daniel Levy wants Tottenham to deliver on the pitch - after announcing a record annual profit of £4.1m for the year ending 30 June 2005.
They recorded an increased turnover, plus a profit on player sales of £5.6m.
"We now need to deliver success on the pitch if we are to continue to invest at this level," said Levy.
"Significant investment means the club have the playing resources to improve performances but with so many new team members time will be needed."
The results come a year after Tottenham revealed annual losses of £2.7m, with a ninth-placed Premiership finish cited as a prime reason for the turnaround.
They have made a fine start to the new season, with boss Martin Jol leading them to third place in the Premiership behind Chelsea and Charlton.
Tottenham's spending on players over the past two years has risen to £61.8m and Levy now wants success on the pitch to follow that large investment.
However, he has not ruled out making further signings if the right player is found.
"We will look to strengthen areas where we see weaknesses," he added.
"But, ultimately, we have to ensure we do not overstep the balance between players being motivated to fight for places and players not being able to reach their potential through lack of opportunity."
Their improved league finish, from 14th in 2003-04, helped Tottenham's turnover to exceed £70m for the first time.
That £70.6m income was a step up from £66.3m in 2004.
Levy said: "These are record results - producing the club's highest turnover and operating profits.
"In addition, we retain an enviable net debt position, despite investing heavily in the squad over the past couple of years.
"All these factors underline the robustness of the business we now have but also highlight its potential to grow if we can get all elements of the club right - both on and off the pitch."
It was also revealed how the club had looked at measures of making savings, with player wages now increasingly performance related.
"This has had the effect of not only rewarding those players who contribute most to the club but also results in sustainable player wage costs," finance director Matthew Collecott reported.
The Sunday Times October 09, 2005
Robert Winnett
ARSENAL football club has been hit with a bill of nearly £12m after an investigation into a tax dodge used on payments made to players and agents.
The north London club is set to be the first high-profile victim of a campaign by HM Revenue and Customs (HMRC) against tax avoidance in the game.
Arsenal set up a series of front companies and offshore trusts to reward its stars and save millions in tax every year. On average, players were left paying about half the 40% tax rate for high earners.
The scheme, revealed in The Sunday Times last year, is now considered illegal by HMRC, which is demanding at least £11m back tax.
Payments of more than £4m to agents have also been ruled not to be an “acceptable business expense”. Arsenal must pay an extra £700,000 Vat on these.
Premiership sources fear that the actions by HMRC — a merger of the former Inland Revenue and Customs — will make it harder to attract top foreign players to Britain when they can still benefit from tax-free payments abroad.
Thierry Henry, Arsenal’s star striker, has disclosed that he will not begin negotiations for a new contract until next summer, prompting fears he will quit England.
Peter Hill-Wood, the Arsenal chairman, said: “The Revenue are crawling all over us. We thought we acted perfectly legally . . . but now maybe the rules have changed. We are not the only people who have been doing this. It’s obviously not helpful [in retaining the services of top foreign players].”
The club’s tax dodge was revealed in documents detailing the divorce case of Ray Parlour, a former Arsenal midfield player, who was forced to disclose his salary details to the courts. It showed he earned a pre-tax package of £1,557,267 for the 2001-2 season on which he paid £350,000 tax, a rate of just 22%.
In its forthcoming annual report, Arsenal will detail the £11m it has put aside to cover the payments. Hill-Wood said he believed HMRC was also investigating individual players. It is not clear if the club may be forced to pay any extra tax they owe to stop an exodus of its stars.
It is understood the tax investigation has been discussed by Premiership clubs, which are considering whether to make formal representations to the Treasury. A spokesman for the league said he was aware the Revenue had been probing Vat relief on agents’ fees and tax savings on players’ wages.
Top Arsenal players usually sign two contracts. The first pays them an annual basic wage mostly taxed at the higher rate of 40% plus National Insurance.
However, they also have a second “shadow” contract for performance-related bonuses that reward success on the field. These can account for up to half the total pay package and are paid via two offshore front companies that accountants say enables foreign players to avoid almost all tax.
As a result, Henry is estimated to have saved almost £70,000 a year, Arsene Wenger, the manager, about £118,000 annually, and Dennis Bergkamp more than £45,000. British-born players were able to cut their tax rate from 40% to 25%.
Middlesbrough and Leeds United have also previously used employee-benefit trusts to reward players.
I think this is the same 12Million they got for Patrick LOL
Spurs eye success as profits soar
Chairman Daniel Levy wants Tottenham to deliver on the pitch - after announcing a record annual profit of £4.1m for the year ending 30 June 2005.
They recorded an increased turnover, plus a profit on player sales of £5.6m.
"We now need to deliver success on the pitch if we are to continue to invest at this level," said Levy.
"Significant investment means the club have the playing resources to improve performances but with so many new team members time will be needed."
The results come a year after Tottenham revealed annual losses of £2.7m, with a ninth-placed Premiership finish cited as a prime reason for the turnaround.
They have made a fine start to the new season, with boss Martin Jol leading them to third place in the Premiership behind Chelsea and Charlton.
Tottenham's spending on players over the past two years has risen to £61.8m and Levy now wants success on the pitch to follow that large investment.
However, he has not ruled out making further signings if the right player is found.
"We will look to strengthen areas where we see weaknesses," he added.
"But, ultimately, we have to ensure we do not overstep the balance between players being motivated to fight for places and players not being able to reach their potential through lack of opportunity."
Their improved league finish, from 14th in 2003-04, helped Tottenham's turnover to exceed £70m for the first time.
That £70.6m income was a step up from £66.3m in 2004.
Levy said: "These are record results - producing the club's highest turnover and operating profits.
"In addition, we retain an enviable net debt position, despite investing heavily in the squad over the past couple of years.
"All these factors underline the robustness of the business we now have but also highlight its potential to grow if we can get all elements of the club right - both on and off the pitch."
It was also revealed how the club had looked at measures of making savings, with player wages now increasingly performance related.
"This has had the effect of not only rewarding those players who contribute most to the club but also results in sustainable player wage costs," finance director Matthew Collecott reported.
