Newcastle United are under investigation over alleged “extensive” tax evasion on player transfers, court papers have shown.
Details of the allegations have emerged as the club failed in a legal challenge against search warrants issued to HM Revenue and Customs during Operation Loom, which saw dawn raids by HMRC on premises including St James’ Park as part of a £5m tax investigation involving Premier League and French clubs. The papers show HMRC investigators suspect Newcastle, owned by the billionaire Sports Direct tycoon Mike Ashley, of involvement in an elaborate scheme to evade income tax, VAT and national insurance.
The allegations relate to the club’s part in the transfers of players including Demba Ba, Moussa Sissoko, Papiss Cissé, Sylvain Marveaux and Davide Santon. HMRC said Newcastle had “systematically abused the tax system” with the use of “sham” contracts that disguised the true recipients of agents’ fees.
Investigators seized documents, computers and mobile phones during 6am raids in April on St James’ Park, the club’s training ground Darsley Park and the home of Lee Charnley, their managing director. Charnley was arrested but later released without charge.
HMRC cited Ba’s free transfer from West Ham United, whose London Stadium was also raided during Operation Loom, as an example of how the alleged tax scam worked. Court papers referred to a £1.9m fee paid by Newcastle to Simon Stainrod, an agent acting on behalf of the club during negotiations to sign the Senegalese player in 2011.
The vast majority of that money was then allegedly “secretly transferred” via a law firm to companies linked to Ba and unlicensed agents. The companies named are Sarl Ba Corporation, France-based Quatorze Management, Silkee Management in Enfield, north London, and Panama-based Zumbada Ventures Corporation.
The alleged arrangement was in breach of FA agents’ regulations and happened in the “full knowledge” of Newcastle, according to HMRC officer Lee Griffiths. He said this meant both the club and Ba evaded income tax and national insurance because the fees were not treated as “taxable benefits enjoyed by the player”. HRMC said it missed out on nearly £1.2m as a result of the labyrinthine structure.
“I believe that the contractual arrangements are a sham and do not reflect what actually happened,” said Griffiths. “The club’s agents passed on the vast majority of their fees to other agents acting for the players or to associates of the players.”
HMRC said Newcastle also benefited from the arrangement because it reclaimed VAT on fees for agents’ services ostensibly paid to Stainrod but actually funnelled to third parties.
Griffiths testified that such practices were “common across many of NUFC’s player transfer dealings”, while court documents revealed he has also raised “suspicions” about Ba’s subsequent transfer to Chelsea in 2013.
HMRC’s allegations relate to transfers made during the tax years from 2010-13, when Charnley was football secretary and Derek Llambias was Newcastle’s managing director. It said Newcastle had been subject to a tax inquiry in 2011-12 but was believed not to have disclosed all relevant emails. Griffiths said he now believed all payments made by the club to agents were potentially the subject of criminal proceedings.
A spokesperson for HMRC said it was “pleased that the court agreed these warrants were lawful and justified in this case, and rejected each of the five grounds for which the review was sought. Our investigation into suspected tax fraud continues. We do not comment on individual cases or ongoing investigations.”
A previous statement, issued at the time of the raids, which involved 180 officers in the UK and France, said: “This criminal investigation sends a clear message that, whoever you are, if you commit tax fraud you can expect to face the consequences.”
Newcastle had challenged the legality of the search warrants on several counts, including that there was no reasonable grounds for believing the club had committed tax fraud. In a statement, the club said it was disappointed with the ruling and was considering its options including whether to appeal.