Correcting Traynor’s Record Myopia on Image Rights – by Ecojon

“In Traynor we Trust” is the current rallying cry from the Darkside with the great man leaving offside-rule explanations to mere mortal scribes to pontificate on intricate tax affairs.

His latest subjective rant has given the Ibrox faithful a vision of Hector hammering at the Parkhead Gates demanding back-tax for image rights. I doubt from his scratchings that Traynor had much of a classical education but Hector actually found Paradise at the Gates of Troy  🙂

I would also observe that if the EBT route has been followed then perhaps Ibrox should be preparing to repel the taxman AGAIN.

I won’t deal in detail with the lack of objectivity in his piece and the scorn he pours on the fair play and integrity of Scottish Football fans other than to observe that no one will be surprised by his partisanship.

Jabba appears to have lost the plot over the EBT issue and his latest frenzy calls on the SPL and SPL to mount a forensic tax examination of every set of accounts sent in by every club and darkly hints: ‘You never know what might come to light’.

His ire is centred, as usual, on the unfair way he perceives Rangers to have been treated and he thunders: ‘Yet, this seems to be the standard the SPL are demanding of one club but not all, even though the league body and SFA should have asked Rangers about their EBT scheme from the first year it was included in the Ibrox accounts’.

The SPL Commission when it reports may well rule on whether the way Rangers reported its EBTs according to the rules and till then Traynor, like the rest of us, doesn’t have a clue whether it was acceptable or not. All he has is an opinion and a bias – just like most of us I would imagine although he is meant to be an objective reporter of the facts.

It could be argued that the SPL should have acted when first contacted by the HMRC but it’s likely that Hector asked them to stay their hand so as not to prejudice their EBT investigation and considering that almost £100 million of unpaid tax was involved I think the public purse trumps an SPL probe.

I do believe that both the SFA and SPL would have done anything  to avoid investigating Rangers but were dragged in because Hector was looking for his dosh and a Rangers director publicly blew the whistle about the activities behind closed doors at Ibrox.

So let’s cut the conspiracy against Rangers cr*p who landed in a mess they created all on their own despite strenuous efforts by the suits to find escape routes for them.

Back to tax-busting image rights payments which Traynor appears to think permeates the Scottish Game. What I can’t understand about Mr Scottish Football is his failure to name one single player receiving such payments. Says a lot about his forensic journalistic skills and lack of contacts IMHO  🙂  Of course he has never named anyone with an EBT and side contract either.

So let’s try to look at facts rather than fairytales.

Back in 2007 HMRC tested the law in ‘Sports Club Plc v Inspector of Taxes’ against a Premiership club and two of its players. Hector argued image rights’ payments were purely a tax saving device allowing inflated salaries, through tax savings, which should be regarded as employment earnings.

But they lost the case as the arrangements were declared ‘separate commercial contracts’ for full consideration and excluded under income tax legislation. Image rights aren’t legally recognised in the UK but any ‘personality’ can sell or licence rights to a third party or even his club and in recent times some players have been able to include contract clauses which distinguish between payments for footballing and image rights.

It seems that the practice really spread after the 1998 World Cup when foreign players apparently learnt from Premiership stars that London lead the way in manipulating more than just Libor.

These image rights’ payments are placed in a limited company which creates tax advantages as well protecting against unauthorised use of images.  It was even more advantageous for foreign players with non-domiciled UK status to have the money paid into offshore companies where income is taxed at corporation tax levels, potentially less than half the 45% top PAYE tax rate if company profits are £1.5m or less.

Despite losing the 2007 court case HMRC still believed the mechanism created tax evasion with a strong possibility that the image rights percentage would be inflated to save income tax and national insurance on the footballing-only contract with a £60 million tax loss across English Football.

The problem they faced of course was that unlike EBTs the image rights payments weren’t in a trust for a named player but were being paid to a limited company which had a distinct legal personality from the player.

There was the further complication that image-rights payments didn’t simply reflect the playing ability of a player. Indeed you could have a much poorer player being paid more in image rights than the best player in the team because he had a more marketable image.  Footballing ability might be  a factor but it’s only one strand of the complex mix that produces a David Beckham whose image rights might well overtake his footballing ‘wage’.

HMRC came under more pressure by a 2007 change in law allowing companies to lend large sums to their directors which was only taxed at 2%, being classed as a benefit in kind, rather than direct income. With the 2009 introduction of the 50p top tax rate the whole enterprise became even more financially lucrative for players.

Pressure from Hector finally forced West Ham United in 2010 to freeze payments on the image rights contracts of seven first team players until HMRC finalised their investigations. The club justified the freeze by noting HMRC said tax and NI should be deducted at source and told players’ agents that if they had any complaints then their clients should take it up direct with HMRC.  I don’t think there were any takers  🙂

HMRC also challenged the Portsmouth CVA – they were owed £24 million in taxes but also wanted £13 million off image rights paid to offshore accounts.

By February 2011 HMRC calculated the overall tax loss at £200 million and were cranking up the pressure with Man Utd and Chelsea in their sights and now Mike Ashley at Newcastle United, has followed Chelsea, announcing an agreement with HMRC with an undisclosed sum being  paid to settle image rights issues. HMRC have confirmed that most Premier league clubs have agreed to pay tax arising from image rights payments and they continue to negotiate with the others although the clubs now know the game’s a bogey.

Private discussions between the FA and HMRC hammered out the solution whereby players are graded from A to E depending on their profile and how a club uses their image. Most importantly HMRC has accepted a cut-off date before which payments haven’t been contested. I would think the same formula will be agreed by the SFA and Hector.

However, I really doubt that there will be that much of a problem to be faced in Scotland and the number of players involved will be small compared to England.  I therefore doubt we will see the cataclysmic collapse of Celtic no matter how fevered the imagination of some aging hacks might become.

Perhaps if the Great Man was a regular reader here he might have learnt the importance of separate legal personalities when considering anything remotely connected with Scottish Football these days  🙂

Posted by Ecojon