HMRC’s Operation Loom officers believe Newcastle “systematically abused the tax system and therefore all payments to agents made
AROUND half a billion pounds worth of Newcastle United transfer deals face forensic scrutiny from a major tax fraud probe.
HMRC’s Operation Loom officers believe Newcastle “systematically abused the tax system and therefore all payments to agents made by Newcastle were potentially the subject of criminal proceedings”.
They revealed that the five cases of suspected fraud involving the Tyneside club may just be the tip of the iceberg of what could be set to become one of English football’s biggest-ever tax investigations.
Toon officials had challenged the legality of a series of HMRC search and seize raids in April.
But two High Court judges ruled on Wednesday that the warrants were lawfully issued.
The original thrust of Operation Loom centred on deals that brought Demba Ba, Papiss Cisse, Sylvain Marveaux, Davide Santon and Moussa Sissoko to St James’ Park between 2011 and 2013.
HMRC claim arrangements between Newcastle, football agents and players allowed the player to evade liability for income tax and employee’s NICs, and Newcastle to evade liability for employers’ NICs and to claim inflated VAT refunds.
Tax officer Lee Griffiths revealed in court papers that the extent of the club’s suspected evasion may be on a far bigger scale than first imagined.
Griffiths said in court documents that HMRC’s focus at the time was the signing of five players by Newcastle, but he believed that the practices uncovered in these five transfers were common across many of their player transfer dealings.
The five transfers had taken place in the tax years 2010/2011, 2011/2012 and 2012/2013. Newcastle had been subject to a civil tax enquiry for the 2011/2012 tax year, but was believed not to have disclosed all relevant emails in response to HMRC’s enquiries at that stage.
In response to one of the questions set out on the application form seen by the court, Griffiths stated that he believed that Newcastle had systematically abused the tax system and therefore all payments to agents were potentially the subject of criminal proceedings.
He explained that, at the time of the five transfers, Derek Llambias was the managing director and Lee Charnley was the Football Secretary.
He noted that Llambias had ceased to be a director on June 19, 2013 and Charnley had become the Managing Director on April 7, 2014. HMRC’S revelation almost certainly means that they will sift through many more Toon transfers both incoming and outgoing in a bid to find more cases of possible wrongdoing.
It would be difficult to vet all the 100-plus transfer deals involving around £540million in fees since owner Mike Ashley bought the club 10 years ago if HMRC were able to seize the files.
But there is no doubt that Operation Loom will widen the scope of their investigation following Wednesday’s court success.
Their breakthrough came when football agent Simon Stainrod, a former QPR player had files seized in relation to receiving £1.9m from Newcastle for the Ba deal and then distributing all but £136,000 of it to other agents and a company associated with the player.
HMRC could well look again at transfers in the 2011/2012 tax year, when they believed Newcastle hadn’t disclosed all relevant emails in response to their inquiries.
Senegalese star Ba’s £7m move to Chelsea in January 2013 is another deal that could come under the microscope. Griffiths revealed “further suspicions arising out of the transfer of Demba Ba to Chelsea in January 2013”.
There were only two fleeting mentions of the Toon’s billionaire owner Ashley in the document and no criticism of him or directors Graham Carr and Bobby Moncur.
Charnley, whose home was raided in April along with St James’ Park and the Magpies training ground, was arrested, but later released without charge.
The Magpies MD faced some withering criticism in the court document. HMRC investigator Griffiths accused Charnley of having “a track record of dishonesty” and claimed “he could not be trusted”.
Griffiths said: “Mr Charnley had demonstrated his lack of honesty by misleading the FA officials who had interviewed him.
“This was founded on Mr Griffiths’ view that Mr Stainrod had told the truth in his interview with HMRC, which axiomatically meant that Mr Charnley had not told the truth when he advanced a different story in his interview with the FA.”
Newcastle could yet further delay HMRC’s examination of the documents they seized in April by launching an appeal. Until that situation is resolved HMRC are unable to view the data they seized six months ago.
A Toon spokesman admitted they were considering “whether to pursue an appeal.”
HMRC are pleased with the way Operation Loom is progressing, but a resolution to the inquiry could still be a year or so off.