The SPL yesterday released a statement concerning the Employee Benefit Trust payment Celtic made in 2005 to Juninho, in response to what sounded like unfounded allegations made earlier this week.
The league noted, “we have seen reports regarding an EBT in relation to a former player of Celtic FC. The SPL has investigated the arrangements and documentation in that case and has determined that there is no evidence of any breach of SPL Rules”.
Many good employers have understood the benefit of assisting individual members of staff during times of crisis or personal hardship. One very practical way of doing this is to lend them money, which happens in businesses up and down the country every day. When the nature of these transactions involve either a company of sufficient size, a lengthy repayment period, or a high value loan, a formal structure is needed to establish the terms of the transaction, not only for the benefit of employer and employee, but also for the tax authorities – who authorise tax-free payments of this kind.
These tax rules were not established to allow wealthy individuals to escape their social duty.
Not long after Rangers first operated an Employee Benefit Trust Celtic were approached and offered consultancy to establish a similar scheme. The promised benefits were huge, vast quantities of cash would no longer go to HMRC and would be freed up to spend on new players.
Celtic were not convinced.
Loans would need to be repaid and if not, contractually binding transactions would need to be documented in accordance with SPL and SFA rules, and this very documentation would make them liable for tax. For Celtic, EBTs could only be used in limited circumstances, would be unable to deliver a significant impact on the business, and would introduce a further layer of professional costs.
“How can these work?” That was the question. How on earth can a club pay millions of pounds into a Trust none of which is contractual? Players, and their agents, like to have things written down. If you write it down and inform the authorities, you’re taxed on it. Celtic were not prepared to enter any written agreement and not declare it to their auditors, HMRC or the football authorities.
What was the cost of this principled stance?
In season 2004-05 former World Cup winner, Juninho, arrived at Celtic from Middlesbrough on a straightforward contract, his only contract with the club, which was correctly registered with the football authorities. He only lasted eight months before agreeing to terminate his deal. Celtic made a payment of around £750k into an EBT the player had from before his time at the club.
Celtic informed HMRC of the details of their EBT transaction with Juninho and were told this was regarded as income, not a loan, and that they would need to pay tax. Celtic then paid tax due on top of the £750k which went to Juninho. It was a pointless and expensive exercise for Celtic, but they dealt with it honestly and openly.
The club’s understandings of EBTs from five years earlier were confirmed, this was not a way to avoid taxation by filtering part of a player’s income away from PAYE. Board members of any other club which understood how to make this work were clearly a lot smarter than our guys. They were also able to buy players and win leagues while our board were hammered daily for their prudent values.
I bet directors at that other club are sounding pretty contrite now, humbled by the emerging news. There will be no self-serving vainglorious rabble rousing.
Far from Celtic being subject to criticism on this matter, scrutiny of their actions will only reveal the stark cost of following the rules when others don’t.
Congratulations to the campaigners who for 23 years sought Justice for the 96. We all watch the game in a safer environment because of the loss endured by the families bereaved at Hillsborough. Yesterday’s report condemns the actions of many: some senior police officers, sections of the media, one or two of who should never work in the industry again, and a former MP, whose actions were truly appalling, and who remains a knight of the realm, but those running the game, those responsible for Health and Safety standards, and various governments have a responsibility to bear.
Dangerous crushing inside and outside football grounds was a fact of life in the 1980s, including at the Janefield St entrance to Celtic Park.
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