Newcastle raided due to fears over destruction of 'secret' payments to players and agents

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Customs officials raided Newcastle United because they feared evidence of 'systematic abuse of the tax system' in which 'secret' payments were made to players and agents could be destroyed had managing director Lee Charnley been forewarned, a court has heard.

HM Revenue and Customs officers executed warrants to search and seize documents from St James' Park, the club's training ground and Charnley's home in April of this year. Charnely was arrested and later released.

Newcastle failed on Wednesday in their bid to challenge the legality of the warrants and a hearing at Leeds Crown Court was told how HMRC believed the club were knowingly involved in a 'criminal conspiracy' of tax fraud.

Newcastle's St James' Park stadium was raided in April by HM Revenue and Customs

Newcastle owner Mike Ashley (right) stands alongside Managing Director Lee Charnley

They made specific reference to the transfer of Demba Ba to Newcastle from West Ham in 2011 - when Charnley was football secretary and Derek Llambias was managing director - for which agent Simon Stainrod was paid £1.9million by the club.

HMRC officer Lee Griffiths told the court: 'In summary, it appears that NUFC paid agent's fees for club services of £1.9m in full knowledge that the majority would be passed on to other agents (including unlicensed ones) and to a company associated with the player, thereby bestowing on the player a benefit that would have generated estimated liabilities for income tax and NIC of £1,160,383 that ultimately would not be paid. 

'I believe that NUFC must have known that they were using Stainrod to pass on the money to third parties.' West Ham's London Stadium was also raided as part of the £5m fraud investigation, while HMRC claim there are 'further suspicions' from Ba's transfer to Chelsea from Newcastle in 2013.

Newcastle's lawyers had argued there were other ways in which HMRC could have obtained information without the need for the 'draconian measure of a search warrant and the seizure of material'.

The signing of Moussa Sissoko is one of four transfers to Newcastle being investigated

But Mr Griffiths stated: 'NUFC would be unlikely voluntarily to grant access to material which would show that senior figures in the club such as Mr Charnley and Mr Llambias were involved in systematic abuse of the tax system'.

He added: 'Given Mr Charnley's suspected role in the fraud, any advance warning of HMRC's intention to recover the material would be likely to result in evidence being destroyed or removed, by Mr Charnley or others at NUFC whose identity was unknown, but who were involved in the criminal conspiracy.' 

The court also heard how the transfers of Sylvain Marveaux, Moussa Sissoko, Davide Santon and Papiss Cisse to Newcastle are also under investigation. Following yesterday's ruling, HMRC will now be able to examine the documents, computers and mobile phones which were seized.

Newcastle said in a statement: 'We are disappointed with this decision given the court's findings.

'We are considering all of our options with our advisers, including whether to pursue an appeal.'