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How English football clubs and their owners avoid UK taxation

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By Tony Attwood

A while ago the excellent Swiss Ramble covered Bolton.  Bolton, (generally known as Notlob in these august columns), a team symbolic of all that was previously wrong with football: rotational fouling, rotational time wasting, and the snarling antediluvian himself: the Fat Slug.

But such days are gone, and this season the backwards reaching club has actually clambered up the league until new leadership – thus revealing once again that some managers can actually make it, and some are a useless bunch of old dodos.

It was the assault on the august columns by Notlobian supporters, who while obviously not sharing my sense of humour (nothing wrong there; how boring it would be if there was only once sense of humour in the multi-verse) actually failed to understand some of the basics of human interaction – that we all have different points of view, that this is a biased pro-Arsenal, pro-Wenger site, and other complex issues like that.

Anyway, Swiss Ramble recently updated the Notlob files starting with comments from the Old Stone Age (or 2003 as it is sometimes known) about needing to balance the books, and not spending lots of dosh that they didn’t have (shades of Arsenal, which I can only admire), only to end up with debts of £38m (careless) and a wages bill that went up from £5m to £21m a year.

The money comes from that off-shore paradise, the Isle of Man, which (in case you don’t know) is a British Dependency, which means it is not part of the EU nor part of the UK.  It is a charming place full of tax exiles and people who think that same sex relationships are a Bad Thing (although the laws against same sex activities were repealed in 1992, same sex couples still do not have equal rights on an island that continued to birch law breaking teenagers under 1976.  In fact now I come to think of it, I am surprised that the Isle of Man has not put in a successful application to run the World Cup, since they meet the humanitarian criteria required these days, but perhaps that is another story.)

Anyway the man financing Notlob is Eddie Davies, who I am sure has not beaten up anyone since being on the island, nor engaged in any other practices that the Tynwold (government) would not approve of, on the island.  He is a benefactor – one of a number of such people in British football, many of whom not only think that being a benefactor is good, but also that it helps the club and the game.

It all led me on to think that what I don’t have anywhere is a list of clubs that are dependent on Benefactors, and details of how many of these Benefactors actually manage to do that most tricky of things – pay tax to the government of the UK.

There is a point here, because if a club has a benefactor who is based outside of the UK for tax purposes (rather like Top Shop, Barclays Bank, BHS, Cadburys, and other British institutions) then I am not really sure what is happening in terms of taxation, because the club has two ways out.  First, it can if it wishes, make a loss, so no tax there.  Second, it can move money to and fro between itself and the benefactor who is outside British jurisdiction, and so avoid tax that way.

So I just began to wonder: could Untold with its world wide resources work out which of the clubs in the EPL have overseas benefactors and which pay UK taxation.  The important point about the list below is that it is totally incomplete, and probably accurate.  I am asking if you could help provide more information.

I don’t have anything like the level of information I need to deal with this, but here are some thoughts:0

Chelsea: debts of over £500m and regular losses, so no tax.  Backed by a Russian benefactor, so presumably no tax.

Manchester United: huge losses because of the Glazers – only relieved by the sale of Ronaldo.   Glazers are themselves making losses, and are US citizens, so presumably no tax anywhere.

Liverpool: Massively loss making, and with American owners, so no UK tax I guess.

Manchester City: Mid Eastern benefactor, no profit for the club, so no tax being paid I suppose.

Tottenham Hotspur: Actually do make a profit (£18m a couple of years back, and possibly more this year, unless Ary’s dealing knock it down.  So maybe the club pays tax if it is registered in England, but the benefactor in the Virgin Islands certainly doesn’t.

Fulham: A curious case, because Mr Al Fahed has repeatedly applied to be a UK citizen and thus presumably a payer of tax, but has been turned down.  The club makes a loss of a few million a year, and doesn’t pay tax.

Aston Villa: A prime benefactor case in which the benefactor charges the club a high rate of interest and so makes decent money out of the club – which was presumably the reason the manager left at the start of the season.   Mr Lerner is an American citizen and so presumably doesn’t pay tax.

Birmingham City: it has never been quite clear who owns the club, but it is probably a Chinese syndicate who don’t pay tax in the UK, although they have on occasion made a profit, and so have presumably paid the UK exchequer some tax.

Sunderland: Sold to an American last year, with lots of debts, so doubtful if there is any tax.

Bolton Wanderers: see notes above – debts, losses and an owner outside of UK control.

Wigan Athletic: a benefactor with honour – Dave Wheelen doesn’t take interest on his the money and has no set repayment date.  No tax, but honour.

Stoke City: Stoke speak with forked whatnot.  Claim they are debt free, but owe the man who owns bet365 a big fortune.  don’t know if he charges interest, but there won’t be tax from the club.  The question then is whether bet365 is actually registered in England – I think it is registered in Gibralter, which means no tax.

Everton: utterly dependent on the benefactor owner, who maybe pays tax here.   They certainly don’t.

West Ham United: the previous owners didn’t pay tax because they were Icelandic, but the pornographers now in charge who knows.  They make a loss and are still paying Sheffield United for the fraudulent way they stayed in the EPL.  Does Mr Gold pay tax?  I don’t know.  Why don’t you ask him?

Wolverhampton Wanderers:  Steve Morgan must be the envy of Aston Villa since he is owed £13m but doesn’t charge any interest.   Loss making.  Don’t know about Mr Morgan.

Blackburn Rovers: must be feeling a bit pissed off at having a slug in charge, but they are now owned by an Indian chicken firm, so I can’t believe there is any tax coming our way.

Newcastle United: the owner seems to be English, and although he has no regard for the regulations about drinking beer in sight of the pitch may pay tax.  The club makes a loss all the time.

So overall, not much tax being paid to the UK exchequer.  True, we (the citizens of the United Kingdom) get the VAT, and PAYE payments but precious little tax on profits or tax from the owners.

All updates welcome.

Revel in the past, enjoy the future.   Untold Arsenal, Arsenal History, and as the definitive present this Xmas, Making the Arsenal

21 comments to How English football clubs and their owners avoid UK taxation

  • LRV

    That’s an awful lot of money the Tax man is loosing. No wonder they keep coming after the small children-Charity, a member of which I am, to see if any sort of dosh can be squeezed out. How broke can you get loosing that much?

  • insideright

    And what about Sky?

  • JC

    Re; manchester city. Given that dubai itself is a tax-haven, and given that the people in chrge of that place and their sovereign fund are legendarily financially savvy, i’d be astonished if everything to do with Man Arab wasn’t registered to an office in dubai.

  • una

    If you look at it differently, the sum of taxes the people in question would pay if they were British, is very very small relative to the contribution these clubs make to the English GDP i.e. the capital provided by these ‘foreigners’ has benefits that far outweigh the costs of not taxing ‘these’ people.

    Its foolish to complain for 2% of the pie when you’re getting 98% of it. Comments?

  • Phil

    Interesting topic Tony. From what I know, they pay taxes on profits recorded in the profit and loss account. With most EPL sides making a loss, it’s unlikely many will pay tax at all.

    The issue is that the result from the profit and loss doesn’t equal money made by the club. In the profit and loss, you add or deduct various “charges” that are only really paper charges, no actual money leaves the club. Writing down the value of assets, amortisation and the like.

    What that means is that in the cases where you can choose how much to write of, you can write off lots to reduce your tax bill. Provisions (accountants forgive me if I get the terms wrong, I’ve studied this all in French so may mess terms up in English!) ar whereby you say “right, there is a 67.3% chance we will get charged £Xmillion, in five years. What we’ll do is we’ll charge an amount each year to the profit and loss account to take into account the future risk of the £Xmillion”

    Such a thing is good, unless it gets abused. That’s pretty much what happened when Barcelona’s new President “revised” their financials – he effectively juggled a few of these risks to make his predecessor looks worse; the club didn’t become in cash terms any worse off.

    So there is this ability to tweak the profit and loss to be “tax efficient”. Off the top of my head (I shoudl really check, accounting exam on Friday!), I don’t think dividends are charged to the profit and loss, so taking a dividend wouldn’t actually make a club’s profit decrease to save taxes.

    it’s all very bizarre, profit and loss isn’t actually that useful an account unless you know how to adequately “translate” it. Man U’s £60m profit didn’t mean £60m more of cash left the club than came in… bizarre I know!

    I think that makes sense 😛

  • una

    Foreign ownership is only a result of efficient capital markets. Efficiency in markets = better allocation of capital

    Think of it this way; Since England is experiencing a contraction in their economy, they prefer not to fund companies with very risky returns ala Man City. So the English would prefer to invest in safer, more tested means of earning while oil-rich Abu Dhabi does not mind investing in very volatile companies. Hence, better allocation of capital and risks.

  • Phil

    Just to add, as an economist, I think a tax on profits is utterly stupid. You effectively are applying an additional cost to a business for being successful… Doesn’t seem the most sensible of things to do from my point of view.

  • una

    Phil you need to start studying if you have any plans of passing that exam lol. Anyways :
    Phil – Everybody knows that profits do not equal cash.
    Cash flow is entirely different from profit because some of the charges/incomes you adjust to your profit & loss may not involve any cash at all. These might include Depreciation, which is what you have vaguely tried to describe. It certainly isn’t “there is a 67.3% chance we will get charged £Xmillion, in five years.” It is the writing off of an asset over its useful life. It is not equated on probabilities but on Cost – Residual Value divided by N of years.

    + Dividends are charged to P/L.

    Its not bizzare, its common logic.

  • Doesn’t the Icelandic bank still own around 30% of West Ham? Not sure quite how given that Straufur isn’t supposed to exist any more mind.

    I find the Newcastle situation to be an interesting case, specifically the fan’s venom for Ashley. OK he has done some stuff which caused a negative emotional reaction from many fans and the sacking of Hughton was bizarre, but… In a sense he rescued the club from a Portsmouth/Leeds/Liverpool fate and paid off the debt (although only because he didn’t do his due diligence). He continues to bankroll the club and it would take an extremely deep-pocketed or reckless owner to agree to buy the club and match his investment.

    As for him being ‘cockney mafia’, I believe he grew up in Buckinghamshire, making him about as cockney as myself, and indeed Tony 🙂

  • One more thing, Spurs made a pre-tax loss of around £6.5million in their 2010 results, Swiss Ramble had an article on it I think.

  • Fem Dee

    Just curious Phil; you said: tax on profits is utterly stupid. Does that mean you support scrapping the concept of taxation of profits completely and think we should leave only value added taxes which is also called consumption taxation. We all consume, so none can escape it. The richer we are, the more we are likely to consume either right away or soon. Or do you have other models for paying for public services in mind?

  • Phil

    Of course you’d still have income based taxes but fair question. My pet hates are taxes on profits and taxes on savings. The former reduces the incentive to innovate and goes against the core principle of capitalism by effectively punishing profitmakers. Taxes on savings are similar. Savings are the basis of long-term economic growth: money saved with banks is re-invested into capital infrastructure and the like via loans. Not the sort of thing you should be taxing, quite frankly.

    In recent times I’ve really changed viewpoint from the orthodox, I disagree with the Keynesian approach to dealing with this recession (it wasn’t brought about by an irrational fall of demand that needs compensating for, but a rational correction of demand from a high based on excessive credit and a housing bubble). Taxing saving encourages consumption, while slashing rates as they did simply leads to less saving (therefore less growth in the longterm), less capital in the very banks that needed it the most and effectively punishes with lower returns the savers who were doing the right thing all along… rate drops and fiscal policy have a role to play normally, but right now they are just building up the next bubble (every wondered why there’s a business cycle? Dealing with one decline causes the next crash!) that is going to cause ten times the pain when it bursts. I won’t get started on quantitive easing…!

    My view, a more Austrian School of economics view, would be that cutting such taxes would be funded by a reduction of the state (big style, not this “we’re cutting the deficit now, but not actually enough so our debt is still actually growing” nonsense that we’ve seen at the moment. Real reappraisals of what we are doing with healthcare, welfare and foreign policy and adjusting it to our needs, not worldwide needs. Short term pain to avoid long term collapse. Not very mainstream, but the US treasuries market certainly seems to agree with my appraisal !

  • RedGooner

    I think any company operating in the UK should be paying Tax on profits. Unless you are of the opinion the rich should get richer and the poor poorer. I agree with some on the policy of Tax on savings shouldnt happen.
    But certain people especially those operating in the UK, I dont think they should be allowed avoid or have reduced taxes just because the owner is frequenting back and forth 3 months of the year from the isle of man etc.

  • Rhys Jaggar

    Put it another way Mr Attwood:

    If those clubs paid their players a bit less, so they made a profit, would the tax paid by the players go down and by the club go up?

    Complex issue that one.

    But broadly, all you’re talking about here is which subsidiary of the football club pays the exchequer.

    And at the moment it’s the players……..

    Let’s guess the wage bill for 20 clubs at £1 – 2bn. It may be slightly more, it won’t be less. Let’s for simplicity’s sake say the net tax rate is 30%. It’s probably a bit more, but forget that for a moment. That makes a net contribution to the exchequer of £300m to £600m from football players and staff.

    Let’s say matchday spending averages at £50 a game. Again it might be a bit low, but play along with me. 10 games a week, average crowd, say 30,000. Might be a bit higher, more likely slightly lower, but play along. That’s £3bn a year give or take spent at the games. Say £4bn if you add in Cup games. Assume VAT at 15 – 20% on all that, that’s another £500 – 800m that should wend its way to the Exchequer.

    As you know, some winding up orders of dodgy football clubs are associated with not paying HMRC. That’s payroll HMRC and, presumably, season ticket, corporate entz etc etc VAT.

    I wouldn’t worry about them not making a profit. I’d worry about them not paying the VAT man and HMRC mate.

    That’s where HMG gets its football wonga from……..

  • Rhys Jaggar

    ‘that we all have different points of view, that this is a biased pro-Arsenal, pro-Wenger site, and other complex issues like that’

    I think the thing that people will get annoyed about is not being pro-Arsenal or pro-Wenger, but being gratuitously insulting about all aspects of all other clubs.

    There’s a difference between passionately supporting your club and hating others. It’s the difference between Evertonians and an element of Man Utd supporters. In my experience, Evertonians are the best benchmark for being good fans. They called Graham Poll a ‘foo**** knobhead’ (when I turned round to identify the voice I saw a 25 stone glaring Merseysider and, sitting on the front row of the top deck, decided that opening my mouth might have me thrown off from a great height) with the best of them when he made a ridiculously pro-Arsenal decision in a Carling Cup tie at Goodison a few years ago, but I never met an Evertonian who spent years and years lamming into all other clubs……..they may well exist, but to date, I didn’t find them…….despite finding MUFC fans who assault you for supporting their local economy and a few other delights of the football supporter ecosystem……..

    It’s more than slightly OTT to say Liverpool were a broadly mediocre club with a good 30 years in them. They’re 5 League Championships ahead of Arsenal and 5 European Cups ahead too. They didn’t do that with an Abramovitch, they did it through good husbandry. You don’t need to defer to them or pay homage to them to show them some respect………

    It’s more than OTT to say that Spurs have no past and no future. As they were the first British club to win the double in the 20th century, the first club to win a European trophy and I do believe they have won more European trophies than Arsenal (3 to 2) – pardon me if my maths is inaccurate. It is indeed the case to say that Arsenal lead 13-3 in titles……you are not required to like Spurs, so long as you don’t incite riots and criminal damage you can hate them if you want (so long as your hatred doesn’t increase the bills to the NHS in these straitened times), but when your basic assertions are based on factuallly inaccurate positions, the so-called ‘classiness’ associated with Arsenal takes a bit of a hit…….I note that http://www.arsenal.com doesn’t spend its time running stories saying ‘Spurs are shit, Man Utd are shit, Alex Ferguson is a wanker etc etc etc’. There may be a complex reason for that, but I suspect it’s rather simpler……they’d rather SAF doesn’t organise the British Press to do the same to Arsenal……….which I note is moaned about a lot when it happens…….

    As you say, it’s a free world to say what you think and indeed others can visit other sites if they wish to.

    But in my book, the classiness of Arsenal doesn’t come from a week-in, week-out pile of insults on anything and anything non-gunner and a slating of anyone who says anything other than all Arsenal players are perfect, all the time, if they aren’t they can earn as much as they like but they are beyond criticism and it is also not allowable to challenge the manager’s decisions whilst sporting a track record which shows a fairly lion-like defence of the great man if the media try and organise a campaign to sack him………

    It comes from an ability to allow the fanbase to process emotional disappointments quickly and respectfully, a requirement of players to live up to the terms and conditions of their contracts and for the manager to respect that he is managing an English club broadly supported on matchday by English fans, not a French one based in Paris. Which simply means that French players must take their chances with everyone else, rather than being a protected species in another land….

    That’s hardly a difficult set of criteria to uphold, but apparently life is more complex than that………..

    Classiness also comes from showing how to lose……..Arsenal 1 Man utd 3, ECL semi-final showed a lot of fans didn’t know how to do that. They walked out in a strop before half-time. No class there…….

    I did some consulting for a major pharma company years ago. There was virtually emotional civil war going on in there because they refused to address internal issues and were generally sniping from the bushes at anyone who pointed that out.

    Now there are three ways such scenarios can play out:

    1. You say: ‘they’re a good lot, but their emotional position and mine are incompatible, so we’ll all get along friendly-like but not spend any time together’.
    2. You say: ‘I’ll work in a different division of the company which doesn’t display such traits’.
    3. You say: ‘this firm isn’t for me.’

    The thing is: difficulties arise when one subset start saying that the rules of engagement are their rules or the others are traitors.

    Don’t think that’s true. Because it’s possible to say ‘Well done’ to a WBA fan who was a guest of a Gooner this season without taking off your Arsenal shirt. It’s possible to say ‘we were rubbish today’ to a Newcastle fan who was a guest of another Gooner this season without taking off your Arsenal shirt. It’s possible to say to a Spurs fan who was a guest of another Gooner this season ‘I don’t know how we threw that away today’ without taking off your Arsenal shirt. And it’s possible to say to a Blackpool fan, another guest of yet another Gooner ‘your fans today were different class’ without taking off your Arsenal shirt.

    It may not be your way, Mr Attwood, and I’ll always respect that.

    But it’s neither traitorous nor disrespectful to do it another way either……..

    Broad church, the Arsenal………..

    One one thing I hope we are all agreed: that it would really be rather a good thing to stuff Man Utd tonight…………

  • Finsbury

    They could start at the bottom, so to speak.

    From Croydon Athletic, all the way up. If that upsets some prickly souls, so be it.

    Yes, it’s disgraceful the way this site carries on 😉
    A nice post by Tim on his blog 7am:

    http://www.7amkickoff.com/2010/its-time-for-the-fa-and-epl-to-end-that-chant-at-old-trafford/

  • Richard B

    An excellent retort Rhys but your examples of doing it ‘another way’ all relate to being magnanimous to opposition fans (sitting, I assume in the Arsenal sections of the ground, accompanied by Arsenal fans, not screaming abuse at the home team) concerning the excellence of the performance of their team against us. This is very different to pointing out the shortcomings of those same clubs away from the pitch. Those shortcomings are often the same ones which actually threaten the existance of those clubs and which those fans are either blind to or ignorant of.
    It’s also the case that the most rabid of the Doom and Gloom brigade need to have it pointed out to them occasionally that, whilst our situation isn’t always as we would wish it, that which exists elsewhere is significantly more troubled and troubling. Being able to point out where our clubs management has got us, relative to other managements elsewhere, is more a reaction to them than to anything else. Or, at least, that’s how I take it.

  • Finsbury

    It’s a complete contradiction. Football in England.
    More volunteers. More clubs. More registered players then anywhere else (per head?).
    Less coaches.
    Less infrastructure & facilities then relative nations, such as Holland (same climate etc…)

    The Qatari bid seems farcical to all who have experience of such things. But, what position are the English FA in, to carp? They have spent £1BN+ and counting upon a football stadium, that didn’t even have a pitch!

    The many enthusiasts and volunteers in Blighty deserve support. The best ally for English Football, it’s future, is the taxman?
    Never thought I’d write such a sentence. It is just a speculative question!

  • Paul C.

    Phil – sorry, but you sound like a typical Economics undergraduate!!!! I remember making arguments for Austrian-style fixes versus Keynesian fixes as well (I have a Masters in Economics). Dont get too hung up on the “schools” approach, when you come out into the real world you’ll find that the various theories are just that, theories, and that every situation has a unique element that the models just dont take into account – i.e. humans. Every “school” has times when their take on things looks right and others when it looks wrong.

    Your take on the current recession is pretty good, but dont forget to go back to 9/11 and subsequent Fed policy as the underlying cause of the housing bubble, especially as it related to demand. And try to avoid the cliches. Saying that “money saved with banks is re-invested into capital infrastructure and the like via loans” ignores the fact that money raised through taxes does exactly the same thing. That money is re-invested into capital infrastructure, perhaps even more than via the private sector (after the all the greatest public works in history was the US building its highway system – how much did that contribute to the growth of the US economy in the post-war years?). There are certainly times when the private sector is more efficient, but not always (look at US healthcare, one of the least efficient systems in the world). You could actually make a very strong argument for saying that the public sector re-invests far more efficiently, especially in terms of wealth re-distribution. Remember, Adam Smith produced an extensive list of areas that the government should handle in an “proper” and “moral” economy, something often forgotten by those wanting to use Smith as a beacon of laissez-faire. As has often been said, Adam Smith did not wear an Adam Smith necktie any more than Karl Marx wore a Karl Marx necktie.

    And I agree with Una, tighten up your thinking on company profits and taxation. Once again, you are veering into cliche.

    Study hard and good luck with your exams.

  • TC

    An article which for me I would sum up as:
    – for all intensive purposes the EPL clubs don’t make much money if any so there is not a lot of tax to be paid. So personally I do not find the article very interesting
    – the comment made by someone about VAT on tickets etc is fair comment so there is lots being paid there in theory
    – a far more interesting route of investigation however would be the player salaries (being the reason there are no profits) – how much tax is really being paid. Rodney Marsh was on Radio 5 Live yesterday stating from an excellent source that Teves makes 260,000 pounds per week net of tax. The amount of employer NI and personal tax liability must be enormous and are they still playing stunts with offshore wages etc. Based on 50 percent tax (maybe not quite at the moment but will be) and employers NI rate of about 13 percent (no limits on emp’er I believe) I make it about 17 million a year alone for Teves towards the coffers. I wonder????

    Love the web site – keep up the good work.

  • They could start at the bottom, so to speak. From Croydon Athletic, all the way up. If that upsets some prickly souls, so be it. – Yes, it’s disgraceful the way this site carries on 😉 A nice post by Tim on his blog 7am: http://www.7amkickoff.com/2010/its-time-for-the-fa-and-epl-to-end-that-chant-at-old-trafford/