How the Manchester City Scandal demonstrates HMRC’s view on the nature of payments

Former City manager, Roberto Mancini, was allegedly paid via “consultancy arrangements”, when in reality, these fees may have been employment income in disguise.

If the club are found to be guilty, the tax discussion centres around the description of the payments. Whilst many payments were described as “consultancy fees”, the findings of the case may reveal this was actually remuneration for employment services. Therefore, HMRC may seek to apply PAYE and National Insurance due to the “sham” nature of the contracts.

The resulting lost tax revenue? Around £12,000,000.

This highlights the important of the nature of payments, an issue which effects all contracts between businesses, as well as with employees. A payment is not what the contract calls it, but rather what actually happened, and the tax implications will vary as a result.

If you are a business owner, it is crucial to understand how your contracts impact your tax returns, and to understand that it is the substance behind the payment which determines a transaction’s tax treatment.

The key tax lesson: HMRC is concerned with the nature of a payment, not just the label attached to it.

Let Stratos help you navigate the way.

Speak to our team for advice based on your circumstances. We are here, navigating the way through the rules and towards the right next step.

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