Sport Does Not Have Probity and Trust at Heart – Guest Post by Carl31

The FTT verdict is out!!

…no not that one, the one recently that found in favour of McLaren over HMRC, and which decided, apparently, provided you are under the jurisdiction of HMRC, that if the governing body of the sport you participate in fines you, it is tax deductible.

Please see

for a brief report.

(Below I mention some sportspeople and companies, and offer some discussion on a ruling. For clarity, I do not suggest that any person or company or party acts or acted with anything other than utmost integrity, and I do not suggest any wrongdoing other than what is already publicly known).

My understanding of this case is :

Past cases, I guess, will have made distinction between ‘commercial losses’ and ‘penalties imposed for breaches of the law’ that occur while a company is trading. So generally a number of types of business or commercial loss that eat into profit, or negate it, are deductible, but losses due to penalty for breaking the law aren’t.

But, when the company is involved in sport, the losses incurred due to breaking the law of that sport, rather than the law of the land, are deductible. It would seem that these losses are deemed as being under the heading ‘commercial losses’.

The taxpaying company argues that the fine imposed is set as a business cost that reduces profit. Just because this cost is a fine, that has come about due to what is judged as contravention of the rules of the sport participated in, does not affect the fact that it is still a business cost. It is still a cost “wholly laid out or expended for the purposes of the trade or profession”, (Income and Corporation Taxes Act 1988)(TA).

Without information on the HMRC argument, I assume they would have made the case that activities in contravention of the rules that govern their sport, are not the company’s usual business activities, or some such argument. I am happy to hear from contributors on this that have info or better guesses.

Judge Charles Hellier in his ruling said a number of things. The main points are below, with a few comments:

1. That the penalty is sufficiently “connected with the trade” of the business to come under the heading of commercial losses.

2. “In my view it is only if the nature of the penalty is to punish a person and if there is a serious public policy which would be diluted by deductibility that the penalty should not be regarded as an expense of the trade.”

[c31 – I think the use of the ‘and’ here is important. The penalty is to punish (is there any other kind of penalty? – ‘penal..’ being a big clue!) but the judge does not see a serious public policy dilution. I disagree with this and return to this later, with the help of one Immanuel Kant.]

3. The words of the TA did not contain references to the ‘normal’ or ‘ordinary’ trade, or to the ‘proper conduct’ of that trade, he said. Instead, these were “aids or glosses on the statutory words deriving from the attempts to explain why expenses might not be deductible”.

4. “In the case of a person whose trade or profession is based on trust and probity, a breach of those principles is a departure from the business he is engaged in because it strikes at the nature of that business: these words help in that context,” he said. “But their usefulness depends on the nature of the business.”

[c31 – to me the judge makes a call that in this case the commercial activity carried on by the company was “not limited” to acting within the confines of its commercial agreements (the laws/rules of the sport) …]

5. “Whilst I can understand that fraud or deceit might be found not to be part of a trade which depended on probity or trust, I can see no compelling reason for finding that McLaren’s trade was so limited,” he said. “I conclude that there is no reason of policy or law to limit the description of McLaren’s trade.”

[c31 – …and that the sport (by implication he means all sport, I think) is a trade or profession that does not have at its heart, “trust or probity”. So the judge holds that the ‘clients’ of the company in question, or the sport in question, or probably sport in general, does not require integrity (which I take probity to mean), and the continuing operation of the sport does not depend on trust and integrity. Also, my assumed HMRC argument seems to be countered here. The judge does not find that contravention of the sport’s governing body’s rules is necessarily undertaking activities that are not usual business activities. This is an important call – ruling that sporting activities of a commercial company can include compliance with and breaches of the rules of the governing body, and it is not expected by society to be otherwise. I have difficulty accepting this.]

Let’s consider the difference between a trade that may depend on probity or trust and one that doesn’t. Why, for example, would a lawyer, a building surveyor, or a consultant surgeon, operate in a trade that depends on integrity, but not a sporting company? I guess, looking at the customers of these trades compared with the customers of sporting companies, there is a difference in the actions that might be undertaken following from the service provided. A customer/client of a lawyer might undertake a costly court action based on opinion given, a customer of a surveyor might then invest life savings on the information provided on the value of a property, customer of a surgeon might undergo life risking surgery based on opinion given. With one risking reputation, one risking life savings, and one risking life itself, it can be clearly seen how important trust and probity are. Does the paying customer of a sporting company – thinking of spectators and fans – make such subsequent decisions and take subsequent risk? I guess not.

Whilst there is an obvious difference, and, in this aspect of the ruling I agree with the judge up to a point, I don’t agree that it is enough of a difference to make the call that integrity is not expected of sporting companies. It may not be required to the same extent, but integrity is at the heart of sport whether it be on the ‘field of play’ or in the boardroom. Again, thinking of spectators and fans, I’m sure everyone expects integrity of both participant competitors and of companies.

I could write pages and pages of analysis on this expectation of integrity and why it exists in sport, but since I don’t want to get ‘preachy’, will make do with a few sentences: IMO there is no point in calling it ‘sport’ if integrity is not at its heart. In whichever sport … the rules define the boundaries that make it the sport that it is. If ‘victory’ is achieved by means outside of the rules, then essentially it’s a victory in a different sport.

Let’s look at some examples or hypotheses. Snooker player Stephen Lee has made the news recently for allegedly ‘throwing’ a match. This is a World Professional Billiards and Snooker Association (WPBSA) investigation and should any fine be imposed, provided Mr Lee has his own company arranged to run his snooker affairs (I assume), and going by the judgement in the McLaren F1 case, it would be offsettable against tax. I’m quite sure integrity is expected of Mr Lee and all his compatriots in the game.

Presuming that football players have a similar arrangement, they would be able to offset any fines against tax whether imposed by their club for breach of discipline, or by the governing body, if my interpretation is correct. This, I suppose, puts a different slant on public perception of clubs disciplining unruly footballers by a fine of two weeks wages, for example. John Terry’s recent fine imposed by the English FA comes to mind (not that I make any claim to knowing anything of the tax affairs of John Terry). HMRC pays it, or put another way, the taxpayer (you and I) picks up the tab. Again, I’m very sure integrity is expected of these participants.

Similarly, were the SPL to fine a club for breach of one of its rules they could offset this fine against tax, if the McLaren case judgement is assumed applicable. Come to think of it, were the McLaren case assumed applicable with any fine imposed on Rangers Oldco from the findings and judgement of the current SPL Commission looking into ‘dual contracts’, they could offset it against tax – they could offset the ‘dual contract’ fine against the EBT liability! (on a presumption that both their FTT tribunal and ‘dual contracts’ decisions go against them). We know, based on the articles of association of the governing body, that utmost integrity is expected of these clubs.

As an aside, and playing a bit of mischief … might it not be the case that, should the SPL Commission fine Oldco a considerable sum, say, £9.4m per year of the ten years in breach of the rules, they would be able to offset £94m against tax for the period and would owe SPL a huge sum, but owe HMRC nothing?

Leaving those concerns and back to the case … given that its been decided that ‘trust or probity’ isn’t expected of sport, it’s crucial that the judge in this case would only disallow deductibility of such fines where serious public policy dilution might occur. Here’s where we enlist the help of Immanuel Kant. This chap Kant, briefly, was a German philosopher who ‘did his best work’ during the enlightenment at the end of the 18th century. Whilst this immense polymath spanned a number of subject areas and is considered a master of many, one of his well known writings was his first formulation on moral philosophy. This contains in essence the question of, when considering the morality of a course of action, what world/society would occur if everyone behaved in such a fashion. If this question is asked of the situation above – tax deductibility of sporting fines deemed as the entitlement of the company by the judge – where would we all be? Where would we all be if all companies who own/operate sporting institutions saw it as part and parcel of their activities to defy their governing body’s rules or laws, and were happy for any financial penalty to be tax deductible. And, society would not expect anything else!

All UK based sport would have no fear of fines since, by implication of the judgement, HMRC would pick up the tab. We would be in a situation where the sporting fine held no fear for competitor companies since they could offset the amount against tax. HMRC would, in effect pay the fines of all companies who’s business is sporting competition, so long as the fines are sporting fines. This, for me, constitutes a serious public policy dilution, if the policy of collecting tax revenue from sporting activities of companies that operate in the sectors is anything to go by. IMO, this represents serious wrongness.

HMRC have right to appeal. This FTT tribunal had a two member panel, with the other member disagreeing with Judge Charles Hellier, but the rules of it allow the one who is chair to have the casting vote. Immanuel and I will keep an eye out for this appeal.

Posted by Carl31



Filed under Guest Posts, HMRC

39 responses to “Sport Does Not Have Probity and Trust at Heart – Guest Post by Carl31

  1. mick

    great read carl maybe when the yes vote is over we should get you to rewrite the tax laws a had to google the word probity forgive my laymenness

    Probity is integrity, but more. Probity is honesty, but in a form more related to trustworthiness. When a person has probity, it is easy for others to trust his words and to have faith in his judgment

    is it true to say financial gian in sport is killing it and are we at a tipping point were its time to take the money back and put it to better use in our towns and citys rather than throwing it at greedy crooks in suits in charge of sport stars

  2. mick

    Chris McLaughlin@BBCchrismclaug

    BBC Scotland has been speaking exclusively to former #Rangers owner Craig Whyte. Across all BBC outlets soon.

  3. mick

    its the bbc lol super chris mc well done to him the scoop of the year lol

    sorry carl for interupting your post but a know you wouldent mind

  4. JimBhoy

    @Mick you just beat me to it

    • mick

      thats sad they were on international duty as well to think they all new about whyte and rfc being skint as well a dont think the sfa will be here long so who ever comes in can moderise the womens rule book sad that happened but just shows there incompatence

      • David C MacKenzie

        They said that FIFA rules stipulate that a team can play with as few as seven players, so they should have played. (1) I am sure that that was NOT what FIFA meant and (2) it is a very good way to make players feel VERY uncomfortable about being available for international duty.

    • mick

      music for the moment

    • Andy


      Jeeso, I genuinely thought we had seen the last of him…..interesting he should grant the BBC an interview after suing them for defammatory remarks about him last year. Can anyone trust a word this man says? Definetly not.

      Would I be suprised if Green had contacted him and CW sent him on to D&P, no. Quite plausible.

      I would love this to be an honest interview stating the facts of what he did in 6 months to turn a club that had been running at a profit for the previous 2 years and paying all their PAYE into one that could not pay their taxes or any other bill for that matter. What on earth did he spend all the money on?? I probably should avoid reading this interview as it will only p£$s me off, I dont beleive this many to be capable of honesty.

      Not that I am a defender of Green, but the fact that whyte pointed him in the direction of d&p isnt exactly headline news for me. Though I suspect Green may have something to say about one or two things that may come out of the interview….

      Most interesting point so far for me, if it is true, is that the Spl knew in October and were completely unprepared for when it happened hence a summer of madness…for me Green has one thing right, and the Spl should not be running any competition in this country, they just stumble from shambles to shambles.

      • @Andy

        We’ll have to see what the bold boy says, but like you I wouldn’t be surprised if there is less to this than meets the eye.

        Green contacted Whyte about acquiring his shares – he’s never made any secret of that. If Green did that before putting an offer into D&P, and Whyte gave D&P advance notice that Green was coming, does that count as an “introduction”?

  5. mick

    @jim bhoy what a scoop for chris is the beeb not barred from the swamp am sure they are lol if not they will be pmsl lol haha

  6. mick

    lets not forget this joker having a dig at economics in 1 of the most socially inescluded areas in the western hemisphere so lets hope we never see him agian depravation affects both side of the glasgow clubs and for 1 of the suits to say this today is his KARMA no rfc or cfc official have ever mentioned or when as low as him so lets hope by tonight its games a boogie for him

  7. Andy


    Terrific read. If this decision is upheld then it could have massive implications….I wonder though, if there are any other cases out there on a big scale, or if mclaren are the first to test the water so to speak….

  8. mick
    the above link is green denying he ever meet whyte back in may liar liar sevcopants on fire

    • ecojon

      @ mick

      Could be dynamite as Green is clearly quoted in May this year stating re any suggestion of a previous connection with Craigie: “It was complete rubbish. I met Craig Whyte for the very first time a week last Tuesday in London.”

      And in the soon to be boycotted Guardian no less 🙂

      • mick

        @ecojon legally there is evidence now of phoenixism IR have a 5 box question and sevco fit the 5 with tics this means its a phoniox its game over also green could have broken the law with lying ,its devo gratuitous alienation
        (business) the process of making a business insolvent in order to evade paying debts and then setting the business up again under a new name
        gratuitous alienation
        A transfer of property by a debtor to another person for no consideration or for an inadequate consideration. ….
        so its a legal mind field now for decision makers and BDO have no choice but to undo the sale and greens backers and d&ps by rule of scots law are basicly on to plums in legal terms the small creditors will gian and hmrc will sell at auction its game over

  9. ecojon

    What fascinates me that in a 2 person tribunal with one dissenting that the chair can use a casting vote to create ‘new’ law and not be constrained to using the casting vote in favour of the status quo.

    I think the men in white or is that whyte coats and grey suits will shortly be coming for the tribunal chair 🙂 It may be one of these situations where the chair thinks that an appeal would help clarify the law on the matter so has ‘engineered’ an appeal situation.

    It’s a ludicrous decision and requires to be overtuned but I suppose it has a silver lining re the NP decision recently by the SFA on Green – by not finding him Guilty and fining the Rangers CEO they have saved the taxpayer money.

    On the wider issue you would think that as long as any sporting body tagged on a ‘bringing the sport into disrepute’ charge then that should prevent any taxpayers money being losts. This government is a cracker – it is cutting benefits to the poorest in society, slashing legal aid but handing taxpayers money to companies thumbing their noses at sporting integrity.

    And there is the harmonisation aspect with Europe and whether this would lead to any fine on Serbia being paid by Euro taxpayers – I can hear the Tory back benches revving-up on that already 🙂

  10. ecojon,+engine+has+been+restarted&

    Provides a bit of the background to the decision and makes it even more shocking when you realise that industrial espionage was at the heart of it.

  11. mac

    It transpires that Charles Green is Craig Whyte’s man after all.

    The con is complete.

  12. COYBIG

    I think Craig Whytes’ announcement, and the timing of it, can mean one of two things:

    Charles Green has reneged on something with him, and if Whyte’s going down, he’s taking them all with him.

    Or, he want’s to scupper the share issue, becasue he would get a better deal if the assets where sold off.

    That’s a shame for Charlie tho, ain’t it. I mean, all that traveling, keeping a straight face whilst talking a load of shite and making himself look like an arse. It looks like it might all be for nothing. Ah well, at least he’s still got his suit.

  13. JimBhoy

    @Andy I had heard mention of the SPL knowing about rangers difficulties late last year but it was never explained what they were told, was it the finance guy at rangers telling the SPL they were having some money probs which is effectively nowt to do with the SPL or was it anything more, what footie club does not hit money probs. It is like the claim that the SFA/SPL saw rangers accounts yearly whilst and it included EBTs but did it have anything other than a vague line item in the accounts when all the SPL/SFA need to know according to their rules is that players sals are accurately recorded with them individually as per their contract. There is saying something and there is giving pertinent information… The baron to me says a lot of things, the majority of which has no foundation or substance and often implicates others to emphasise his vague points and to point score. I hope he gets hung out to dry along with his current cohorts and all those who have had a hand in any finance mismanagement to the detriment of the honest fan and their team loyalty.

  14. JimBhoy

    @Andy he is the Kharma Chameleon mate…

  15. JimBhoy

    Hope the baron still has the keys to those safehouses..! 🙂

  16. COYBIG


    CMcL: Hello?

    CW: Ehh…hello, is this ehhh…Chris ehh..McLaughlin?

    CMcL: Yes, who’s this?

    CW: This is ehhh…Elvis ehh..Pressley.

    CMcL: Wow! Elivs is back from the dead, and he’s phoning me! How can I help you Mr Pressley?

    CW: Ehhh…it’s not eh..Elvis, I was joking. It’s Craig ehh…Whyte. You really ehhhh…are so guillible ehhhhh…Chris.

    CMcL: Oh, OK. How can I help you Mr Whyte?

    CW: I want ehhh…you to that I ehhhh…introduced Charles ehh…Green to Duff & ehh…Phelps.

    CMcL: OK.

    CW: And ehhh…Duff and ehh…Phelps knew all about ehh..the Ticketus eh…deal before eh..I ehh…bought the ehhh…club.

    CMcL: OK.

    CW: Ehh…and ehhh…the eh..SPL eh…knew that ehh..Rangers eh…had eh…no money ehhhh…in October ehhhh….and where ehh..heading for ehh…administraion.

    CMcL: OK.

    CW: Are you ehhh…not going to ehh..ask me any ehh…questions then?

    CMcL: Questions? I thought the role of the media was, you tell me what you want to say, I write it down and post it on the BBC website, word for word. Questions?..hmm…let me see…what did you have for your dinner last night? Hello?…Oh, he’s hung up.

  17. duplesis

    and Green’s response:

    RANGERS Chief Executive Charles Green has reacted to news today that Craig Whyte has made certain claims in an interview with the BBC.

    In the interview to be broadcast later today Craig Whyte has claimed he introduced Charles Green to Duff and Phelps as the administrators searched for a buyer for Rangers.

    The Rangers Chief Executive said: “Yet again Craig Whyte’s version of events paints a misleading picture of what actually happened and it’s regrettable that the BBC is providing him with such a platform.

    “The facts are that direct contact was made by our consortium with Craig Whyte in the first instance as it appeared at that time that his shares would have to be secured in order for any purchase of the Club to progress.

    “I was not present when contact was initially made but subsequently met Craig Whyte who introduced me to the administrator.

    “I had no previous association with Craig Whyte and it is misleading to suggest he ‘brought us in’.

    “I was brought to the transaction by Imran Ahmad following Duff and Phelps contacting Zeus Capital in February, due to their experience in the football sector.“

  18. COYBIG

    The SPL have put a transfer embargo on Hearts. It’s being reported that this will scupper any chance of them resigning Rudi Skacel, but surely the ban won’t start until the end of the next transfer window? That’s the norm, ain’t it?

    • Fraser

      I don’t know if there is a ‘norm’ in this case, but certainly the ban on registrations outwith the window is a punishment of negligible proportions, Skacel’s availability notwithstanding. Why didn’t the SPL make it known that a ban had been applied, however? Isn’t half the point of punishment to act as a warning to others?

      At the same time you have to ask about the wisdom of applying the letter of the law in Scottish football right now with regard to financial difficulties. Both St Mirren and Hearts have been late with salaries this season, but in the first cases it was arguable that the SPL’s failure to pay instalments of sponsorship money on time led to the problem. If a club is in genuine difficulty owing to falling incomes is it really in the game’s best interests to hound them? The HMRC’s response to the Falkirk FTT case blogged yesterday is instructive. HMRC took proportionate action, and maybe you can say the SPL’s action against Hearts is similarly token.

      Mind you, I have less sympathy for Hearts since, like Rangers, their problems are a legacy of their own stupid greed and financial mismanagement. The registration embargo wouldn’t preclude them shedding players through redundancy which is the way they have to go if they genuinely want to get their costs under control.

      • COYBIG


        I was hinting at the fact The Rangers transfer ban didn’t start until after the transfer window shut.

        • Fraser

          Ah yes of course! Mind you, Hearts to the best of our knowledge haven’t taken the SPL to court to challenge the ‘illegal’ ban. Yet. Maybe Vlad’s on holiday.

  19. JimBhoy

    “I was brought to the transaction by Imran Ahmad following Duff and Phelps contacting Zeus Capital in February, due to their experience in the football sector.“

    D&P contacted Zeus capital, interesting, did they contact anyone else if not is this showing a bias and why for? Surely them contacting in February is a bit weird? D&P were just in the door…

    It will all come out in the washing..

    • Fraser

      I seem to recall from earlier blog posts here that Zeus Capital’s ‘experience in football’ was not exactly of the extensive and impressive variety.

  20. Fraser

    Just wondering – even if the SPL did hear Whytey tell them a year ago that Rangers were rubber ducked, what precisely could or should the SPL have done about it that they didn’t subsequently try and do? I.E. try and keep Rangers in the SPL at all costs without alienating the supporters of every other club, thereby inducing the ‘Armageddon’ they sought to avert?

    They could not very well have gone public with Whyte’s claim, could they? In any case, was it not already widely known by then that Rangers had massive debts and a tax case hanging over them? Forgive me if I’m off the chronology there.

    They could not have gone about changing the transfer of ownership rules at that point as they did in April to try and take control of the decision on SPL membership or people would have smelt a rat. Nor could they have rushed forward the SPL2 restructure plans for the same reason and because they were working steadily towards it anyway. Nor could they have primed the SFL, or done anything else to avoid Rangers being accused of all the rule breaches they were subsequently charged with. Nor indeed could they have done anything to stop Whyte himself suspending PAYE payments since Rangers’ own directors didn’t even do anything about it, and I bet Whyte didn’t mention THAT to the SPL in their conversation – “Rangers are stuffed, and by the way I’ve stopped paying the Taxman, what ye gonny dae aboot that then?”

    I’m no fan of the SPL or SFA, but Craigy is in danger of drumming up some sympathy for them by trying (like the Charlie Green and the Loyal Apologists) to pin the blame for everything on the governing bodies’ doors.

  21. JohnBhoy

    Oh what a tangled web they weave when they practice to deceive.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s