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.

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.