West Ham’s transfer dealings screamed into the headlines with yesterday’s shocking revelation that London Stadium and Newcastle’s St. James’s Park were raided by Her Majesty's Revenue and Customs. The result of an investigation into £5 million tax fraud, The Sun report that this was triggered by Demba Ba’s 2011 transfer between The Hammers and Newcastle.
They believe that the transfer spurred tax investigators to launch the investigation last year, along with Ba’s subsequent move to Chelsea.
A source told the tabloid paper:
“They then started looking at other player transfers, ownership, payments to players and agents and crucially image rights.
“Image rights had been widely used to avoid paying national insurance and income tax on player salaries. The money was paid into offshore accounts.
“Newcastle and West Ham were repeatedly asked to cooperate but officers felt they were far from helpful. There is a large focus on the movements of players between France and England from 2011 onwards. French authorities are assisting.”
West Ham and Newcastle’s numerous transfer dealings with French League One side Marseille appear to have also come under scrutiny as the investigation covers both English and French tax authorities.
You might remember that Dimitri Payet joined West Ham from Marseille in 2015 for over £15 million, the French club bought him back in January 2017 for £25 million.
West Ham French transfers over last seven years... pic.twitter.com/As6nATWrT4— Brace The Hammer (@BraceTheHammer) April 26, 2017
Meanwhile, Newcastle have had a steady influx of French players over the past few seasons. With many deals involving Marseille, which may explain why managing director Lee Charnley was initially arrested. He has since been released.
Conversely, here are Newcastle's transfers over last seven years... pic.twitter.com/H7RoxqQxno— Brace The Hammer (@BraceTheHammer) April 26, 2017
A deal involving French winger Florian Thauvin could be investigated, he was signed for a reported £15 million in 2015. Thauvin has since been loaned back to Marseille for two season. He will be permanently re-joining the club in the summer for £9.8 million.
Back in December 2016, the HMRC revealed:
“We have 43 players, eight agents and 12 football clubs currently under inquiry around the issue of image rights."
Image rights are a bit confusing, bear with me while I try to explain them. This income is treated as a separate revenue stream, distinct from money earned playing for a club in Britain.
This income is taxed differently and could be used to pay less tax.
HMRC announced in December they were investigating ‘image rights’ contracts https://t.co/DtKH9yTPhs— Brace The Hammer (@BraceTheHammer) April 26, 2017
These payments come primarily from foreign countries that use a player’s image, which allows them to pay a different rate of tax. They cover the player’s name, photographs and voice - anything which can be used to generate income in a commercial deal
Jon Thompson, chief executive of HMRC told a committee of British Members of Parliament, image rights payments were ““the most significant risk in football”.
Any player who earns over £150,000 wages from his club is subject to the usual 45 per cent tax rate we see for high earners. Image rights are a foreign revenue source and are taxed at only 20 per cent. Plus the club does not have to pay national insurance contributions. Which could make them rife for exploitation to avoid Britain’s heavy tax rate.
West Ham and Newcastle are co-operating fully with the investigation and we will learn more as the story rumbles on.