Last updated : 25 January 2006 By Editor
From the Guardian:

Premiership clubs could end up owing the tax man millions if a test case next month goes against Newcastle United. The case hinges on the issue of Value Added Tax recovered by the St James' Park club on agents' fees in a series of transfers, which HM Revenue & Customs claim should be paid back to the government.

In common with other companies, football clubs are entitled to recover VAT paid on any goods or services purchased in connection with their business. However, the authorities say that Newcastle have been improperly claiming back VAT in respect of certain transfers.

HMRC believes that when fees are paid to players' agents, they are acting for the footballer and not the club. As such, because the player is the employer of the agent, it is impossible for the club to reclaim any VAT paid on the agent's fees.

There is no suggestion of criminality on the part of Newcastle or any other club that may be forced to repay the funds but, if the tribunal finds in favour of HMRC, it will open the gates to a flood of claims against the top clubs.

"The key issue is which party agents who are negotiating between players and clubs are acting for," said a spokeswoman for HMRC. "The Fifa rules state that it must only be one. Clearly it cannot be both; there is a conflict of interest there."

Newcastle's tribunal is set for February 1 and 2.