Law firm recommends clubs review transfer records

A law firm has told British clubs they need to re-examine transfer records over the past three years to make sure all the background information is correct.

With Newcastle United being hit in the PLC v HM Revenue and Customs (HMRC) decision – where a VAT Tribunal held that football clubs are not allowed to recover the VAT paid on fees for agents supposedly acting on behalf of the players – Halliwells recommended that clubs review records.

Newcastle had reclaimed VAT paid by it on players' agents' fees. The club argued that, despite agents being contracted exclusively to represent a player, the agents had in fact acted jointly for the player and club.

It accepted that the players were uninvolved with this situation and that the club had no written contracts with the agents. It also accepted that the FA forms lodged on completion of the transfer were "technically incorrect."

The Tribunal did not accept the evidence given by Newcastle's witnesses as to "industry practice" and considered that none of the documents generated by them, including the FA forms, could be relied upon as being true and correct.

The decision was based upon the Players' Agents Regulations of FIFA, and FIFA's standard representation contract. It held that, in cases where the agent is employed to act exclusively for a player, a club cannot recover the VAT charged by the agent.

Many clubs can now contemplate three years of backdated tax, plus interest, that they may now owe. Premier League clubs alone may have to repay millions of pounds to HMRC to meet these liabilities.

"While we understand that Newcastle intends to appeal, the immediate VAT implications for all professional football clubs which have recovered VAT on their players' agents' costs are substantial and pressing, and will require immediate attention," said George Kelly, Tax Director at Halliwells' Liverpool office.

"Although a VAT Tribunal decision is not binding on all VAT-registered traders, HMRC will undoubtedly treat it as giving them the authority to take assessment action against football clubs with similar arrangements to Newcastle (if they have not done so already).

"This is for no other reason than to protect their position under the three-year cut-off rule. Certainly, if the decision is upheld on appeal, it becomes binding on everybody in the same situation. It is likely that HMRC action will be targeted initially on Premiership and then Championship clubs."

Source: euFootball.BIZ © Copyright 2006 - All rights reserved.