Defo against spirit, and likely the letter, so the charges of cheating would still be made by fans of clubs not implicated. But I tend to agree with you - its not as if the SC auditor was unaware of the payments so the RFL would find it hard to impose retrospective penalties - even if they were minded to.

I suspect the real implications will be retrospective tax bills and tax penalties for clubs involved, higher costs in the interim "messy period", as you say, and then reduced packages available for overseas superstars for the future which may well reduce their flow from the NRL.

Maybe this is one of the reasons GH has been leaving the so called "wiggle" room in the cap for the last few years?

But Wigan informed the salary cap auditor that they were going to defer payments (a practise common in Australia) but still got points deducted for breaching "the spirit of" the cap, despite not spending over £1.6 million (or whatever the figure was) for the year on players salaries.

As I said previously, I really can't wait for the ever so self righteous Mr. Hetherington to put out his statement.

:1k5ifx94Agreed.

:1k5ifx94It depends. What makes you think they did it in the full knowledge they would be challenged? They've been doing it for several years. If they were doing it with the RFL's knowledge and blessing it would be unjust to penalise them for a common mistake, if that is found to be the case, IMHO, of course.

:1k5ifx94These are very different circumstances to other breaches. These are clubs seeking to optimise their tax efficiency, not find ways around the cap. If the schemes are found to be avoidance then its' an unfortunate bi-product that they MAY have breached the cap as a result. You can't apply the same punishments to, say, having a club sponsor sponsor a player, or simply spending too much.

:1k5ifx94Firstly, that's assuming they get penalised for this at all, secondly that is assuming that those penalties take us over the cap and finally, for the reasons stated above, I think it would be very different circumstances to other clubs breaches. But if fans of clubs who have breached the cap over the years feel any better about their club as a result then fine.


:1k5ifx94My comment was purely on the basis it was avoidance. I do not condone evasion. My personal opinion is it was not evasion. I've seen many schemes like this over the years.


:1k5ifx94HMRC do not win every case they bring. far from it in fact.



:1k5ifx94The Grauniad article still refers to HMRC as the Inland rev so I will take everything in there with a large pinch of salt.

You can't can you.

If i were you I'd take a cold shower and put the box of tissues down because you're not at that golden moment yet, and may never be.

GH by plenty!!

there's a horse running in the National called Offshore Accounts. It's gotta be a sign>

Owned by Mr P.Caddick and trained by Mr G.Hetherington.

I'm not sure you're right! Surely the cap total is based on the combined value of the players contracts with nic and paye worked out as a portion of that rather than an additional amount! What clubs have done is pay less page and nic allowing them to pay a higher proportion to the player but no higher overall amount a £200k contract is counted as £200k towards the cap regardless of whether £1k or £10k is deducted from the players wage for tax, the clubs haven't paid out more simply changed the ratio of what goes to the player rather than the tax man!

The only instance I can see the cap involved is for retrospective payments being demanded for players still at those clubs as players need to be registered at the time of payment to be counted on the sc, even then I think the rfl would struggle to enforce that as it isn't a payment to the player but the tax man

Also I'm pretty sure the nic part of it is irrellevant as nics were removed from the cap when it went down from 1.75m to 1.6m so any additional payments of ni wouldn't count int the cap anyway

Wrong though. Example:

Club A is up to the salary cap. It pays its top overseas player £200k p.a., all as salary. Player receives say £130k net of tax (very roughly, ignore NIC for now...will come back to that - keep it simple)

Club S is also up to the salary cap. It pays its top overseas player though only £37k p.a but also £100k as image rights, using the Singapore Parachute device to avoid UK tax. Player receives £30k net salary plus £100k image rights = £130k net of tax.

In both cases player receives the same. Except that the cost to the club, and the cost ranking under the salary cap (again ignoring NIC to keep it simple) is £200k for club A and only £137k for Club S.

Club S therefore has an additional £63k of salary cap space free compared with club A - yet they both have identical squads!

NIC DOES matter because employees' NIC is treated same as tax - although its capped at the upper earnings limit so you'll be talking only modest numbers here. Employers' NIC used to count under the cap until they recently reduced the cap but also eliminated employers' NIC from the calculation. Otherwise, like tax, using the image rights/Singapore Parachute device saves the club money for the same player value.

Surely now you can see that the effect of what Club S has done is to free-up a load of salary cap - which can then be spent on either more players, better players or bigger packages to overseas players to entice them away from signing with club A. And no doubt clubs like club S would indeed spend that "extra" salary cap money.

Which might, just might, help explain why certain clubs appeared to get rather more bang for their salary cap bucks?

Except that it looks like the device has now been killed off, AND by the looks of things not just going forward but back into previous years too.

What it would mean is that, for club S, the £100k image rights would be treated as being a net payment and the gross payment - i.e. as if it was salary, and on the same basis as club A, would be £163k. The club would have to account to HMRC for the £63k extra tax. And the cost of that player for cap purposes rises from £137k to £200k.

Which is a bit unfortunate for club S, because they were at the cap already so they are now £63k over the cap.

Thats quick and simplistic, as the underlying tax issues are rather more involved than that and I've deliberately ignored NIC, but I hope it serves to demonstrate WHY this matters in respect of the salary cap?

It's a good job Leeds always keep some wriggle room beneath the cap level, just in case....

It may be very significant that Stains have apparently indicated they are not spending to the cap this year (thus far) according to Chair Maker, who I think reached a similar conclusion.

That's an odd way of looking at it Adey.
Would you say the same about a club using the ability to avoid income tax on salary allocated to a pension fund vs a club not putting any into a pension fund?
It's the same principal.
What we really have is whichever club offers the player salary x. Then can do some work to help the player avoid paying tax. Whether that be putting some of it through offshore image rights, or into a pension pot or whatever. Remember, this has to be with the co-operation of the player - if it's going into a pension fund or into image rights, he doesn't have immediate access to that part of his pay.

Can see the point you are trying to make, but you look to be missing the point (or we are at cross purposes), and the distinction between "avoidance" and "evasion" which is central to this issue.

Paying a player part of his package in the form of pension contributions is tax-efficient and sensible for all concerned, if the player is happy with it. The contribution still counts under the cap, but but the NI savings (there is no tax saving compared to if the employee made his own pension contribution out of salary) would mean you could offer the player a slightly bigger overall package for a given cap spend, or free up a little cap space. (Lets not worry about the "salary sacrifice" rules here)

That's all fine and legal - although potentially of limited benefit to overseas players. The treatment always complied with tax legislation, and the treatment under the cap was always consistently correct.

It would also be fine and legal - in just the same way - if it had always been clear that paying Image Rights on a deferred basis using the Singapore Parachute was legal. If HMG (HMRC could not do it in those circumstances) subsequently decided to tighten up the rules, that would not change the fact that the payments made till then were fine and legal. Genuine tax avoidance to help both player and club.

And in that situation, we would not be having this discussion

But lets start by looking at a situation where the club paid pension contributions for the player which fell outside the rules for tax-eligibility e.g. because the % was too high or the recipient scheme was not tax-approved. In both example cases, the employer is liable because they are responsible for ensuring compliance with the tax rules. In such cases, the result would be that the player's pension scheme received a rather lower net amount (or the employee pays more tax), and so the player loses out. If the player is happy with that and/or bound contractually to accept that, then fine - no salary cap issues, just a hacked-off player.

But otherwise, to get the player back to the package you contractually agreed you'd have to pay more into the pension (or as salary). Which would increase your spend under the salary cap.

Moving on then to the similar situation of paying a player part of his package as Image Rights tax-free, where under the existing legislation such payments should not have been made tax-free. In that situation, the tax treatment was never in compliance with the tax legislation, and additional tax and NIC (as well as penalties and interest) will have to be paid - by the employer as it was its responsibility. Now the employer COULD seek to recover the tax and employees NIC from the player, and so (like the second pension example above) the player loses out. And again, if the player is happy/stuck with with that then fine - no salary cap issues (not strictly true because of employers' NIC in earlier years, but let that ride)

But again, if the player is not happy with that (and its unlikely he would be unless he agreed to bear the risks of possible tax claims when contracting with the club - always a possibility, albeit useless agent!) then the club would have to increase his salary or image rights to compensate. Which is what the club having paid the player's additional tax and NIC amounts to. And again, in that case it has increased your spend under the salary cap.

Hope you can see the difference? legitimate tax avoidance is fine, but what amounts to tax evasion will mean a grossing-up of whats been paid to/for the players and that will mean extra spend under the cap. Whether its through non-qualifying pension contributions, taxable image rights payments paid free of tax, or whatever.

All this issue hinges on whether there is a tax avoidance loophole which is being closed - and that would require legislation - or whether its evasion of tax/NICs under existing legislation, in which case HMRC are empowered to recover the tax and NICs so evaded. The fact that its HMRC alone dealing with this, and the reporting (consistent with my understanding) that HMRC are seeking to recover tax and NICs for prior years, rather suggests the latter.

Hope this clarifies a bit more?

Those are the two issues.....in fact....it's only the first that really matters.

adey, how about this.

club LR pay players what they are due.

club WW pay an aussie winger £30k and his wife £150k for a part time job in the shop

Now now Tad! That's never being anything other than rumour.

Besides, it would be more tax efficient to pay the player right up to the ceiling of the 40% tax point

was told by a former player at said club

Current players usually know FA about their colleagues payments (I didn't know a lot about what whoever else was on, and it was pretty clear to keep quiet about what I was paid) so I wouldn't pay any attention to the word of an ex player

Load of bollox. No idea where you get such a scandalous and libelous idea from. £150k??? Very disappointed in you.

Received wisdom was that it was at least £175k...and over at Stains they will tell you it was at least £1/2m...



And anyway, player R could not be paid that way now - the Operational Rules now attribute such payments to the player. And whatever Wifey earned did not anyway stop him getting owned by Naylor in a certain GF...

sorry for being a little out, i was only guessing

Adey I don't disagree that what you have put is probably correct, I just think it's a strange assumption that you have made where the rfl are going to treat a retrospective tax demand paid 2009 as a payment made in 2006, surely they will treat a payment made in 09 against the 09 sc which would mean any player not with the club no longer counted on the sc

What we also have to take into account is that clubs haven't hidden this from the rfl and the previous accounts have already been judged compliant in full knowledge of this scheme,

As for the spirit of the cap, it was nonsence before and more so now, there is another huge assumption you have made in that this scheme is an attempt by clubs to circumvent the cap when it could simply be an added bonus to players, you are assuming in you examples that this is an attempt to spend more under the cap rather than a business offering it's highly paid highly prized employees help with tax efficiancy

Smokey, I don't have the whole tale by any means, and I've had to be deliberately simplistic on here - for example, image rights are usually paid to personal service companies not to the player direct, and that in itself raises a whole load of additional issues for club and player (as any contractors on here using a PSC, and having to contend with IR35, will know!). And that's before you get into the question of overseas-registered PSCs...

All matters accounting and financial work on an "accruals" basis, where you have to account for costs and revenues in the periods to which they relate - not (necessarily) the periods in which they are charged. This means that if you paid image rights for (say) 2006 then any tax consequences relate to 2006, and if that means having to gross-up payments then that relates to 2006. Taken to the ultimate extreme, if the omission from previous years is very large then you'd have to restate your accounts for that year rather than reflect it in the current year. So logically you'd expect the salary cap - which after all reflects expenditure in a given (standard) financial year - to follow that. You'd have to recalculate the cap spend for that year. Otherwise, for example, a club could hide cap spend from the SC auditor until after the audit, and if it subsequently came to light then the club would get away with it - manifestly unfair.

I suspect any accountant looking at this issue would assume that the prior years' cap expenditure would need to be recalculated without a second's thought? Cos the accruals and matching concepts are drummed into us right from the start.

BUT...all that said, I don't for one minute think the RFL will seek to re-open prior years' calculations regarding payment of "excessive" image rights in lieu of salary. Firstly, because I suspect most clubs used the device (hence the reference to "at least ten clubs"icon_wink.gif. And secondly, as you rightly say, because the SC auditor will have been fully aware of the payments at the time, and obviously did not question or challenge them. Clubs could rightly (IMO) argue that since the SC auditor did not seem to be concerned about the potential tax exposure (and after all, this excessive image rights issue has been live for a few years now in other sports) then why should the clubs have been - for SC purposes anyway.

And I'd tend to agree with that argument, to be honest.

So whilst I don't agree with your first point, I agree totally with your second - to me, that argument is irrefutable.

As for this "spirit of the cap" thing, I agree that's probably bollox (except when it applies to the Pies...), although IIRC correctly the Operational Rules do make provision for trapping anything not specifically covered the substance of which is nevertheless to breach the cap rules - so its far from black and white there.

But the argument that it’s merely (and only) an attempt by clubs to help their employees with tax efficiency is surely debunked by the fact that (some at least) affected clubs still spent up to the cap? Therefore, the substance of what's been done is (yes) to remunerate employees in the most tax efficient manner, to thereby free up cap space (and funds) to spend elsewhere. More bang for your bucks, as I said earlier.

And there is nothing whatsoever wrong with that! Indeed, I applaud it. PROVIDED its legal. What this is all about is whether the amounts paid as image rights, relative to the total package and in particular relative to the direct Image benefits to the club, were reasonable (and legal) or excessive (and therefore tax evasion).

There is a second issue - the use of offshore arrangements regarding image rights and similar payments for overseas players (little scope for UK-domiciled players) to avoid tax completely. As far as I can tell that's all part of the investigations, and the scope for evaded tax is likely to be considerably higher. I suspect that far fewer clubs are implicated here, and this is where some big settlements could arise.

That's my (simplistic) take on it all, anyway!

The use of offshore accounts etc (which i backed today) is down to the players and if they bring the money from those accounts into the UK, if they dont then it isn't liable to losing 31/51% tax & ni. If they do then it is. Hence HMRC will do an investigation into their income and where it has come from.

According to todays League Express Warrington are being pursued by HMRC for a six figure sum by HMRC.

Two other clubs are also thought to have been in negotiations with HMRC over the same issue.