Normally debates about obscure footballers take place in pubs and living rooms, but now one such debate has found its way to a tax tribunal.
Geovanni Deiberson Maurício Gómez, simply known as Geovanni, played for Hull AFC between 2008-2010. During his time at Hull, the Brazilian attacking midfielder made use of a tax loophole involving an offshore company based in the British Virgin Islands named Joniere Limited.
Geovanni’s image rights had been transferred to Joniere and Hull AFC paid Geovanni’s image royalties to this company. It’s a tactic so common that the Public Accounts Committee has had hearings on the matter.
When that PAC hearing took place, HMRC’s chief executive Jon Thompson stressed that the schemes were legal. But this time, in the case of Geovanni, HMRC aren’t having it.
The tax authority contends that the payments are in fact salary, wages or “other emoluments of the employment”. HMRC considers them too “excessive to be commercial, suggesting that there may be some other reason why the club decided to enter into the agreements”.
As Judge Malcolm Gammie phrased it in his report: “It is HMRC’s position that Joniere was effectively a nominee of the player, receiving sums that were legally due to the player himself”.
This hearing was only preliminary. Hull’s designated counsel, the eminent Keith Gordon, argued that HMRC’s was going about its case in the wrong way. HMRC is saying the image rights arrangement is a sham. But, Hull AFC says, HMRC needs to prove it.
Transferring image rights is a tricky business. This particular transaction involves three parties: the club, Gómez and his company. He must have transferred some rights to that company.
And HMRC is saying that this arrangement never formally occurred - or it hasn’t seen proof. And even if it did happen, it still returns to HMRC’s contention that payments were too excessive to fall under this bracket anyway.
The original case involving image rights and footballers was back in 2000. In that case - involving Dennis Bergkamp and David Platt - the image rights were also paid into a holding company. But it was decided in that case the rights payments were reasonable and not done specifically to avoid taxes.
So the Geovanni case represents a second bite of the apple for HMRC.
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.