The House of Commons Treasury Committee has written to HMRC to ask about any tax implications of the Premier League’s investigation into Manchester City.
The league this week said the club arranged “sham contracts” with a number of commercial partners as part of a scheme to disguise secret funding of more than £830million. They confirmed that City have been found guilty of all charges related to breaches of Premier League financial rules between the 2009-10 and 2017-18 seasons.
Independent commission findings
An independent commission found that, during that time period, the club arranged the “sham contracts” as well as “relying on sham agreements to artificially inflate the club's revenues and reduce its costs”. The club continue to deny any wrongdoing and have until October 2 to submit an appeal.
Now, the powerful Treasury committee has sent a letter to HMRC in relation to the findings. Chair Dame Meg Hillier MP has asked for reassurance that the department is “seized of the importance” of the case and poses a number of questions to Permanent Secretary John-Paul Marks.
Questions to HMRC
These include whether HMRC is aware of the findings and if an unredacted copy of the report had been requested by the department. The Chair also asked for an overview of HMRC work around the taxation of remuneration and any other potential tax avoidance within football clubs.
The letter states: “While I acknowledge that taxpayer confidentiality may inhibit what you can disclose, I would welcome reassurance from HMRC that you are seized of the importance of these issues and the public interest in the case.”
Tax expert assessment
Tax expert Dan Needle has also asked on the Tax Policy Associates website, did Manchester City cheat HMRC out of £12 million? He wrote: “Manchester City’s rule-breaking may go beyond football. The independent Commission found that the club inflated its income, concealed expenses and paid a key individual through a sham consultancy.
“Leaked documents identify him as City’s manager, Roberto Mancini, with payments routed to his company, Sparkleglow Holdings Ltd. We believe the evidence points to £12m in unpaid UK tax. The consequences could include a much larger tax bill and a criminal investigation.”
He states his report is a preliminary assessment based on the evidence currently available - acknowledging that City maintain their innocence. Based on this he concluded: “Roberto Mancini received large payments under a consultancy contract with Al Jazira Sports and Cultural Club.
“On the basis of the Commission’s findings and leaked documents, the contract was a sham, and in reality represented remuneration for Mr Mancini’s employment with Manchester City. Manchester City should therefore have applied UK PAYE income tax and National Insurance in the usual way – but the evidence suggests the club unlawfully failed to do so. We expect around £12m of tax went unpaid.
“We don’t know whether HMRC has commenced an investigation into these arrangements and, if it has, whether it has been resolved – but there’s no sign of any settlement payments in Manchester City’s accounts. The highly irregular nature of the arrangement, and the Commission’s findings of sham and intentional concealment, suggest to us that there should be a criminal investigation into whether tax evasion offences were committed.
“The Commission’s finding that Manchester City knowingly filed false accounts suggest that Companies Act criminal offences may have been committed.”
Club and manager response
In full, Manchester City said: "Manchester City FC is both disappointed and surprised by the opinion of the Premier League Commission, that has been published today. The Club is innocent of the accusations made by the Premier League and a comprehensive body of irrefutable evidence exists in support of all of its positions, relating to this case. The Club will therefore be relentless, and where necessary proactive, in any and all appropriate regulatory and legal forums.
"The Premier League process remains ongoing, with significant elements uncompleted. Manchester City FC will now pursue the appeal avenues open to it, on the basis that the opinion contains clear material errors, of law, principle and fact, and is unsafe. The Club has diligently respected due process for eight years on the basis that the Premier League Board and Executive would behave as an independent, impartial and fair-minded regulator, free from partisan influence. The Club is obviously restricted in what it can say further until all future proceedings are complete."
Mancini said, in response: "I don't think Manchester City were found guilty, quite the opposite. It's not a problem that concerns me, and it isn't anything new. Manchester City are not guilty, and on the double contract it isn't my problem, theirs if anything."
