Newcastle lose court appeal in tax probe

Newcastle United have lost the first legal round of the case brought against them by the UK tax authorities.

A court has ruled that the dawn raids on the club’s office on April 26 were legally authorised and that there are grounds to suspect the club has “systematically abused” the tax system.

The timing of the court proceedings is awkward for the club and the resulting investigation could be inconvenient if it goes deep into Newcastle’s transfer dealings just as owner Mike Ashley opens potential sale talks with foreign buyers.

With the court having ruled against Newcastle’s claim, HMRC tax investigators can now examine the documents and computers seized in the raids.

Allegations are that Newcastle made payments to agents acting for the club but who in fact were “secretly” transferring the money “to intermediate and ultimate recipients so as to benefit the player or the player’s agent.” The payments were never declared as income by the players or agents enabling the club and the player to avoid tax. The club was actually declaring player wages far below the real money that was being paid.

If proven, a consequence of the scheme is that Newcastle appeared to be paying its players far less than other clubs, though in reality they were able to pay the same, if not more, by using the chain of overseas intermediaries to avoid tax liability.

If the scheme is proven by HMRC the tax liability for the club will likely run into many millions and the criminal cases against the individuals involved will almost certainly result in jail time.