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Tax ruling puts Arsenal’s wage talks in danger

Arsenal will find it harder to satisfy the wage demands of top earners such best canada goose jacket style as Thierry Henry after a House of Lords ruling forced them to pay more than four times as much tax in 2004 as in 2003.

The FA Cup holders’ accounts, released on Monday, detailed a tax charge of £11m, equivalent to 56.9% of their pre-tax profits, as they sought to are there any canada goose outlet stores repay monies saved from their exploitation of a tax loophole. There is no suggestion that Arsenal acted illegally. However, the best place to buy a canada goose jacket Inland Revenue is expected to seek repayment of the tax avoided on what the House of Lords deemed to be « potential emoluments ».

The loophole involved employee benefit trusts, a favoured scheme of high-earning City bankers which facilitated the avoidance of the flat-rate 11% of employer national insurance contributions.

« The tax bill is slightly larger than one would expect it to be because we have had employee benefit trusts and there was a decision in the House of Lords we’ve provided for, » said Arsenal’s managing director Keith Edelman. « We’re just being cautious. »

Though such trusts enabled the employee to be paid a « loan » on which a tax rate as low as 1% could be charged – and the loans often required no repayment to the employer – it is not expected that the Revenue will seek to recover funds from Arsenal’s players. But the Revenue has moved to claw back money from the club itself.

Worryingly for Arsenal, even if the taxman did make such an investigation into the players’ earnings, canada goose coat 1000 foreign nationals can ultimately avoid any future UK tax liability simply by moving best canada goose jacket abroad, a factor that may influence players when they consider their football futures.

With the Inland Revenue having set up its own football unit to investigate the sport’s financial transactions, employee benefit trusts are just one aspect the taxman is expected to clamp down on.

Another scheme that football clubs are believed to have adopted from City firms with high wage bills is to incorporate a company in which employees are shareholders and can you wash a canada goose jacket in the washer which pays bonuses as dividends. Through Sevco 1270, of canada goose coat 1000 bulbs led which the Arsenal secretary David Miles is the company secretary and a director, Arsenal set up a business which could be used as a mechanism to pay its players bonuses without incurring high-rate income tax and buy canada goose jacket cheap national insurance.

In June 2001 a private unlimited company was incorporated in which players such as Tony Adams jacket, Dennis Bergkamp and Henry and the manager Arsène Wenger had shareholdings of up to 9.2%. Bonuses paid in the form of dividends to these shareholders would attract a lower overall tax bill.

For overseas players wishing to invest their money offshore and over the long term, all UK taxes could be avoided. To facilitate this, a Jersey-based trust held almost 35.6% of the company’s shares.

The unlimited-investment-company mechanism would have enabled Arsenal to pay higher net wages than if bonuses were paid directly into players’ bank accounts. Whether any such dividends have been paid in the past three years is unclear; meanwhile, 1270 is nine weeks overdue in filing its latest accounts.

Once again, the practice of paying dividend-based bonuses is not illegal, but one analyst expects this also to be targeted by the Inland Revenue.

« The dividends become emoluments and the Revenue may consider there is a buy canada goose jacket nyc case to answer, » said the analyst.

Arsenal may therefore find it more difficult to provide Henry with a net salary commensurate to his earning potential. With his current contract expiring in 2007, Henry has entered negotiations with Arsenal over a new deal, but Barcelona are understood to be willing to trump whatever Arsenal offer.

Gilberto Silva, whose own agreement runs to the end of this season, has held only preliminary discussions over a contract extension. Understood to be paid £18,000 a week, Gilberto is seeking a significant rise in his salary.

Arsenal are also wrestling with the financial pressures of their Emirates Stadium project. The club paid a net £14.1m in loan interest in the financial year to canada goose coat 1000 calorie diets April 2004 as they service a net debt that has reached £153.3m and continues to rise.

It is perhaps no coincidence that Arsenal found it easier to reach agreement with the lower-earning teenagers Philippe Senderos and Cesc Fábregas over long-term deals during the summer.