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Criminal Finances Act: Clubs, sports agencies to meet September 30 deadline

Saturday, 16 September 2017

As of 30 September 2017, all football clubs, sports agencies and their intermediaries will fall within the remit of the Criminal Finances Act. Through this Act, criminal sanctions can be imposed on companies and clubs that fail to prevent tax evasion by any employee, agent or intermediary.

The Act is potentially a concern for football clubs on two levels: the corporate criminal finance offence it creates will hold companies and partnerships liable for their employees and intermediary’s actions; and it will also extend to international tax evasion if there is enough evidence for a UK case. The penalty for failing to prevent tax evasion will be an unlimited fine, set by the court trying the case.

From September 30, clubs must have procedures in place to prevent persons associated with them from committing a tax offence – including players, agents and professional advisers. The court can also request for individuals to explain the source of wealth for any amount in excess of £50,000 if this figure appears to be disproportionate to their income, through an Unexplained Wealth Order (UWO).

The impacts of the legislation could well be far-reaching; at first glance, they are certainly vague. For example: it is unclear exactly how this will affect players who have been employed in one or more different countries for a period of time prior to joining a UK club, and the time limit that will be in place for clubs making enquiries into the tax affairs of their new employees.

All players, but particularly those from overseas, will probably have limited or no knowledge of the UK legislation, which could lead to some unwelcome surprises when the court enquires about their past tax filings; moreover, the willingness of players to hand over details that may be considered private will also become a pertinent, and probably unsettling, question.

This legislation also poses a series of dilemmas for clubs: will it be difficult to adopt tax return assessment as part of due diligence in prospective players, and exactly how much pressure can clubs be expected to exert on their players to hand these over? Complying with new legislation without upsetting your new star player could be problematic. Furthermore, the unexplained wealth order is set at £50,000. This will mean that a huge number of players (and non-playing staff) will likely be affected, not just those on Premier League wages.

Key to a club’s defence is to ensure that it has reasonable procedures in place to prevent the facilitation of tax evasion. The legislation is coming into effect from 30 September 2017, so there is not much time for clubs to prepare and have reasonable procedures in place.

HMRC is being given significant enhanced powers to investigate organisations suspected of breaching rules. It can commence an investigation into a business and its procedures based on suspicion alone. Clubs are not, however, necessarily expected to have addressed every principle by September. They must show that assessments are undertaken and reasonable procedures have been considered and are beginning to be implemented, particularly in the higher risk areas of operations.

‘Reasonable procedures’ depend on the size of your club. As a broad guide, HMRC recommends a principle-based approach to defining these procedures, using the following six actions:

Conduct a risk assessment
Ensure your reasonable procedures are proportionate
Implement due diligence procedures
Gain buy-in from club management
Communicate to all stakeholders, especially players and their agents
Periodically monitor and review your reasonable procedures

The timeline for implementing these changes is extremely tight. With that in mind, it is important that clubs carefully map the risks specific to them and focus work on those areas that are high risk, as a priority.

Smith & Williamson’s Sports Group was formed so that athletes can have all aspects of their financial affairs expertly managed under one roof. Our team of chartered financial planners, tax advisers and investment managers, take a complete view of your requirements, and work with players, agents and clubs to ensure our clients never fall foul of the rules.
Credit: fcbusiness

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