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Manchester United are currently engaged in talks with the British government over the amount of tax paid on the club’s transfer dealings, involving both players and agents, with the possibility of further payments required to balance the books.
Sam Cunningham (inews.com) reveals HMRC (His Majesty’s Revenue and Customs) – the national taxing authority in the UK – are “thought to be in talks with several clubs about potential money owed,” as part of their attempts to “claim back what they believe is unpaid tax”.
The Tax Policy Associates, a non-profit organisation dedicated to improving the public’s understanding of tax, revealed HMRC had “lost out on £470 million” from Premier League clubs between 2015 and 2021. This loss reportedly stems from avoidance on paying the correct amounts of VAT, income tax, and national insurance to agents.
Last season, HMRC recouped £124.8 million from Premier League clubs for the 2022-23 year. In 2021-22, the figure was estimated to be £58.7 million. It remains to be seen what figure the tax authority settles on for the 2023-24 year.
“We will continue to carefully scrutinise arrangements between clubs, players and agents to ensure the correct tax is paid,” HMRC revealed last season. “We work closely with the football industry to educate and deal with tax risk head on.”
The topic of Premier League club’s finances has been an area of particular focus this season, with both Everton and Nottingham Forest receiving points deductions (6 and 4 points respectively) for breaching the league’s profits and sustainability rules (PSRs).
PSRs prohibits Premier League clubs from accumulating losses in excess of £105 million in a three-year period. United had posted a £32.8 million pre-tax loss for the first quarter of the 2023-34 financial year. This loss is why, Cunningham reveals, the club were “unable to spend liberally in January”, despite the obvious needs for reinforcements in Erik ten Hag’s squad.
When asked in January about the prospect of signing a new striker, following the news Anthony Martial would be ruled out for much of the remainder of the year with a hip injury, the Dutchman replied, “I looked but there is no space. There is no space for FFP to do something about this lack of quantity in the striker position.”
In the three months since this point, the club has posted a £27.2 million pre-tax profit, aided by this frugality in the winter window. The Athletic reveals this has “pulled [United] back towards the black” – the black being the metaphorical place of financial propriety; the red being the opposite.
It remains a delicate balancing act, however, with every penny being counted ahead of an important summer window for the club.
The INEOS Sport team, who gained full control over the football operation of United following Sir Jim Ratcliffe’s ratification as co-owner, are in the midst of a comprehensive overhaul at Old Trafford, beginning with the establishment of a ‘best-in-class’ executive structure.
This will be spearheaded by Omar Berrada, poached from local rivals Manchester City to be the club’s new chief executive. Dan Ashworth is likely to join him as sporting director, if a compensatory deal with current club Newcastle can be struck. A head of recruitment and technical directors will also be appointed to work closely with the sporting director, with Dougie Freedman (Crystal Palace) and Jason Wilcox (Southampton) linked to these roles.
Once this team is in place, INEOS will then turn their attention to the coaching and playing staff, as they seek to close the gap between United and their rivals on the pitch, as well as off it.
A large swathe of the United squad are thought to be available to be sold this summer, with a range of targets already being lined up to take their place. Similarly, a decision on the long-term future of Ten Hag will be made, though there is little indication which way INEOS are leaning with both Champions League qualification and the FA Cup left to play for this season.
Whatever approach the new executive team decide upon, however, it will be an expensive one, requiring every ounce of flexibility in United’s financial might.
As such, if the club were forced to make considerable payments to HMRC, to account for unpaid tax, it could “hinder spending power in the upcoming transfer windows.” And while Cunningham indicates United “do not yet know how much they may have to pay”, he believes it is “likely” the result will have an impact on budgets moving forward.
In the club’s recent financial report, there was acknowledgement of the ongoing discussions with the tax authorities:
“We are currently in active discussions with UK tax authorities over a number of tax areas in relation to arrangements with players and players’ representatives. It is possible that in the future, as a result of discussions between the group and UK tax authorities, as well as discussions UK tax authorities are holding with other stakeholders within the football industry, interpretations of applicable rules will be challenged, which could result in liabilities in relation to these matters.”
It remains to be seen how significant a blow the outcome of these conversations with HMRC may hold for the first stage of the INEOS revolution at Old Trafford.
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