Revisions to the FA ‘Regulations on Working with Intermediaries’ – August 2017
9th August 2017
SOFIA - Society of Football Intermediaries and Agents (association)
SOFIA Workshops and Dates Announced
6th October 2017

Update on the ‘Criminal Finances Act’ – September 2017

SOFIA - Society of Football Intermediaries and Agents (association)

How Does the Criminal Finance Act Affect Football Intermediaries & Agents

 

Not concerned about the Criminal Finances Act ? ……..
maybe YOU SHOULD BE!

You have probably heard about the Criminal Finances Act (“the Act“) and either shrugged your shoulders thinking ‘it doesn’t affect me’, or as a ‘responsible’ football intermediary (agent) have chosen to pass this on solely to your professional tax, accounting and legal advisers for them to handle.

BUT WAIT… it does affect you, and not just you but your clients as well – whether they are players or clubs.  This is irrespective of who paid your agent’s commissions and for what; you could unwittingly and, somewhat innocently, be implicated.

And from 30 September 2017, two new tax evasion offences come into effect, and yes, you read correctly, these are CRIMINAL OFFENCES.

Put simply the Act creates the corporate crime of failing to prevent the facilitation of tax evasion, specifically;

  • relating to UK tax evasion, and
  • relating to foreign tax evasion.

The new law means that corporates are criminally liable if they fail to prevent the tax evasion facilitation by a person associated with them.

A tax evasion facilitation offence is broadly speaking where the associated person assists another with a tax evasion offence either in the UK or abroad, and as such as a football intermediary you need to make yourself aware if you (or your clients) will possibly be (or may have inadvertently been) breaking the law by making payments to corporate vehicles that have been set up to evade tax.

 

FOOTBALL CLUBS NEED TO BE VIGILANT BUT SO DO AGENTS AND INTERMEDIARIES

Whilst football clubs needs to be particularly vigilant given HMRC’s well publicised interest in the football business, you too as an agent or intermediary also need to be vigilant especially in cases where you are one of several agents involved in a high value or high profile transaction (or transfer).

Clubs are often engaged in high value, high profile transactions with several agents and intermediaries involved. Those deals often have a foreign element to them and these new obligations also apply to non-UK tax. This is likely to add an additional hurdle to football transfers.

 

I AM NOT A CORPORATE, SO NO PROBLEM
… BUT ARE YOU AN ‘ASSOCIATED PERSON’ TO AN OFFENCE?

Unwittingly you may be categorised as an “Associated person” in committing such an offence under the new act.

An associated person is defined in one of three ways:

  • An employee;
  • An agent; or
  • Any other person who performs services for or on behalf of the corporate.

Note that the person must have been acting in one of these three capacities when the tax evasion offence or offences which the corporate is accused of failing to prevent was committed.

Put simply, in a sporting context this could very easily include a footballer’s agent, club and commercial partners.

 

HOW CAN A FOOTBALL INTERMEDIARY (AGENT) MITIGATE ITS RISKS?

Moving forward it is strongly advised that you exercise caution when being party to a transaction where you are not sure of the implications from a tax perspective. Acting on a recommendation from another party involved in the transaction is simply not enough and qualified independent legal advice should be sought. Also, it is essential that a risk assessment is carried out prior to the implementation of any policy and procedure that may have tax implications for you and/or the client you are working on behalf of.

With regards to past practices or involvement that you think may be deemed questionable by HMRC and other authorities, then once again independent legal advice should be sought. And whilst the Act is not retrospective, it could catch activity which is part of a continuing course of conduct which commenced prior to the end of September but continues thereafter, such as a contract renewal or extension.

 

WHAT CAN YOU EXPECT TO SEE AS FOOTBALL INTERMEDIARY (AGENT) IN THE FUTURE?

In practice, football clubs should want to make sure the roles of intermediaries and agents are carefully and properly defined, and that those persons then conduct themselves accordingly which may result in more paperwork, more due diligence and arguably more time consuming activities for you in ensuring your clients are properly represented.

The structure of players’ remuneration packages is bound to come under scrutiny from the authorities (e.g. HMRC); as we all know, the world’s best players have found themselves at the sharp end of criminal tax inquiries in other jurisdictions recently, and it is safe to say wider scrutiny will be undertaken further down the football ladder and on a greater scale.

Under UK law moving forward, if a player’s tax affairs are under criminal investigation, the question of whether the club has failed to prevent the facilitation of tax evasion may well arise, and along with this whether the intermediaries (agents) involved were adjudged to be ‘associated persons’ in facilitating the offence. The related adverse publicity generated is unlikely to be something that can be ignored.

Contracts will need to be carefully drawn up. Each party must be clearly defined by name and role. Clubs will have to be particularly careful to make sure that payments made in accordance with the terms are made directly to the party defined in the contract.

It may make sense for the club to limit, as far as possible, the number of individuals who fit into the “associated person” category when dealing with a high-risk transaction.

 

WHAT ARE THE PENALTIES?

Conviction carries with it an unlimited fine, with the Serious Fraud Office (SFO) being one of the prosecuting authorities authorised to prosecute these offences and worth noting that the SFO under Deferred Prosecution Agreements, have so far generated settlements totalling hundreds of millions of pounds.

Put simply this is not simply something you can ignore and shrug your shoulders about, it affects your clients, your company, your employees, your business associates and ultimately YOU!

Given the high-value and high-profile nature of the football business, HMRC and law enforcement is likely to proactively scrutinise football clubs. This, coupled with various internal changes with HMRC, has created an environment where you need to take preventative action to protect yourself and your client’s.

 

WHAT IS SOFIA LOOKING TO DO TO HELP?

Whilst this notice is just the first step in trying to reinforce how serious these changes may well be for football intermediaries (agents) and their clients we are also trying to educate and raise awareness. Subsequently SOFIA is running a number of workshops over the coming months that address such important subjects as the Act and access to these is subsidised (if not free for SOFIA members).

In addition to this we are working hard with professional associate organisations to make available to you some of the most informed professional advice and facilities, so as to enable you to undertake your intermediary activity in a professional, effective and legal manner.

 

For any media enquiries about SOFIA and its plans, please contact SOFIA’s media team via media-enq@sofia.football

 

 

Thank you to Waqar Shah ; Tax Lawyer and Managing Associate at Mishcon de Reya LLP for his contribution and expertise on the topic of The Criminal Finances Act. If you require any further advice of clarification on The Criminal Finances Act or related matters, please contact Waqar Shah on +44 (0) 20 3321 6252    :    waqar.shah@mishcon.com