HMRC investigate football agents for 'serious allegations of fraud'

1st April 2019 Business Crime

On 20 March 2019, HMRC sent letters to 1,900 football agents warning them that they may be subject to potential tax investigations following “serious allegations of fraud.„

The letter, sent by HMRC’s deputy director Kerry Singleton, outlines the Revenue’s concerns and advises that HMRC will carefully scrutinise tax returns to demonstrate that football agents are attributing unrealistic amounts of money to work conducted for clubs or players. The letter states that “if we suspect that onward payments are made from fees received by an agent we will check all surrounding transactions to establish if there has been any potential facilitation of tax evasion.„

The investigations focus specifically on the fees that are paid to agents as a result of football transfer activity. It aims to ensure the laws concerning VAT and income tax are being complied with.

The Revenue is already looking into payments made by 38 agents, 40 clubs, and 173 players. Having received a number of anonymous tip-offs however, the Revenue believe that a greater number of agents are continuing to avoid tax through fraudulent means.

This follows an increased interest in football, which HMRC view as a high risk industry given the large sums of money that flow through it. Throughout the 2017 2018 season £211m was paid in agent fees, which was an increase of £37m from the previous season. A spokesman for the Revenue has stated “HMRC is successfully tackling risks in the football industry, including image rights and agent fees, and has brought in £355m in additional revenue from its compliance activities since 2015.„

There are several criminal offences concerning the fraudulent evasion of tax, notably the fraudulent evasion of income tax, VAT fraud, and cheating the public revenue.

Fraudulent evasion of income tax

A person commits an offence under section s106A Taxes Management Act 1970 if they are knowingly concerned in the fraudulent evasion of income tax by that or any other person.

The offence therefore goes wider than encompassing people who knowingly conceal monies that are liable to income tax to include those who have some level of awareness that income tax is being fraudulently evaded.

There is no universally accepted definition of knowledge, nor is it defined in the statute. Whilst the case of R v Forsyth [1997] advises that suspicion does not constitute knowledge, Taylor’s Central Garages v Roper holds that wilfully turning a blind eye can constitute knowledge.

The offence is committed when somebody makes a false statement to HMRC. It can be committed by one single transaction, however the fewer the acts the more easily it can be held that the person has acted negligently as opposed to dishonestly.

The Court of Appeal held in Attorney General’s Reference (No 1 of 1981) that the definition of fraudulent is “dishonestly and deliberately intending to evade the prohibition.„ HMRC have expanded on this definition, stating that “deliberately refraining from notifying chargeability to tax or from submitting tax returns, in circumstances where the person concerned must have known tax should be paid, may well in itself amount to dishonest conduct and therefore to either offence.„

The sentence for this offence, if convicted on indictment, is imprisonment for a term not exceeding seven years, a fine or both.

VAT fraud

An offence is committed under s72(1) Value Added Tax Act 1994 if a person is knowingly concerned in, or in the taking steps with a view to, the fraudulent evasion of VAT by him or another person.

It constitutes an evasion of VAT if the VAT is not paid when it should be, even if it is paid eventually. A person may also be knowingly concerned in the fraudulent evasion if he himself is not knowingly concerned in the fraudulent evasion, but knowingly cooperates with a person who is.

A person may be guilty of this offence if they fail to register for VAT, use invoices bearing a cancelled registration number, or charge VAT for which they fail to account.

A person may also be knowingly concerned in the taking of steps with a view to fraudulent evasion even if no evasion actually occurs, for example if HMRC detect the fraud before the return is submitted.

If convicted of this offence on indictment, a person may receive a sentence of up to seven years imprisonment, a fine, or both.

Cheating the public revenue

It is a common law offence to defraud or cheat the general public. The offence is extremely wide and can include a dishonest act or omission intended to prejudice HMRC. The prosecution need not prove an actual loss to the Revenue or a gain to the accused.

The offence can include:

  • Making a false statement (written or not) relating to income tax;
  • Delivering (or causing to be delivered) a false document relating to income tax;
  • Failing to account for VAT;
  • Failing to register for VAT;
  • Failing to disclose income.

The offence is punishable by life imprisonment. For this reason, the common law offence is used for a small number of serious revenue frauds, where the statutory offences will not adequately reflect the seriousness of the offending.

How can we help?

Our Business Crime and Regulatory team have extensive experience in providing advice and guidance on the offences outlined above. If you are a football agent and have received a letter from HMRC advising that they are investigating your tax affairs, please feel free to get in touch with a member of our team on 0345 872 6666.

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Sadie Thomson is a Solicitor located in Manchester in our Business Crime & Regulation department

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