Friday 20 October 2017

Newcastle United lose High Court challenge over documents seized in tax probe

Newcastle United have lost a High Court challenge over the seizure of documents by tax officials investigating the financial affairs of several football clubs
Newcastle United have lost a High Court challenge over the seizure of documents by tax officials investigating the financial affairs of several football clubs

Newcastle United have lost a High Court challenge over the seizure of documents by tax officials investigating the financial affairs of several football clubs.

St James' Park and West Ham United's ground were raided in April by HM Revenue and Customs (HMRC) as part of a probe into suspected income tax and National Insurance fraud.

Newcastle's managing director, Lee Charnley, whose home was also searched, was among a number of senior European football officials arrested and later released without charge.

Business and financial records were seized, as well as computers and mobile phones belonging to the club, which recently secured promotion to the Premier League.

The HMRC investigation centres on football agents and payments made in transfer dealings between English and French clubs.

Two judges, sitting in London on Wednesday, rejected a challenge by Newcastle over the legality of search-and-seize orders obtained by HMRC from a judge at Leeds Crown Court.

Announcing the decision to dismiss the club's application for judicial review, Lord Justice Beatson and Mrs Justice Whipple ruled: "The warrants were lawfully issued."

At a hearing in July, the judges heard argument on behalf of the club that no reasonable grounds existed for believing it had engaged in suspected tax fraud.

But HMRC argued in court that reasonable grounds existed for believing Newcastle United FC was ''knowingly involved'' in a multimillion-pound tax fraud when club offices were raided.

Court orders have so far prevented HMRC officers from examining the seized material pending the outcome of the legal action.

A spokesman for HMRC said after the ruling: "We are very pleased with the court's decision, which we are studying in detail."

The two judges, who had been urged by the club to quash the warrants, ruled that they were lawful "both as a matter of procedure and as a matter of substance".

Lord Justice Beatson and Mrs Justice Whipple explained in their written ruling that the claimants in the judicial review action were three companies involved in the activities of Newcastle United Football Club (NUFC).

They had challenged the legality of decisions by HMRC to apply for search and seizure warrants "in connection with a criminal investigation of suspected evasion of Value Added Tax (VAT), income tax and National Insurance Contributions (NICs) by NUFC in relation to payments made to and via football agents", and the decision of a judge to issue the orders.

Giving the background, the judges said: "HMRC has been investigating whether arrangements between NUFC, football agents and players allow the player to evade liability for income tax and employee's NICs, and NUFC to evade liability for employer's NICs and to claim inflated VAT refunds."

Newcastle argued that the evidence held by HMRC at the time of making its application for the warrants "was insufficient to support any reasonable belief that NUFC was engaged in a dishonest evasion of tax".

Dismissing the club's case, the judges announced that they were "satisfied that the evidence and the facts disclosed by that evidence provided reasonable grounds for the belief that NUFC was engaged in criminality".

They added: "It is self-evident that 'reasonable grounds' are just that.

"They do not mean that any criminal offence has in fact been committed.

"There may, at the end of the investigation, turn out to be innocent explanations for what happened."

The judges concluded: "We are satisfied that HMRC's case was a coherent one, and signified a belief that was reasonable, based on the material that was in HMRC's possession at the time."

A QC for HMRC said during the July hearing that because of the court orders preventing examination of the seized material it was not known if it "inculpates or exculpates" the club.

In their ruling the two judges said that "as matters currently stand", HMRC "is holding a large volume of information seized from NUFC and Mr Charnley, which information HMRC has not yet examined".

They continued orders preventing examination of the material "until further order", pending any appeal moves by Newcastle.

In a later statement, a spokesman for HMRC said: "HMRC is pleased that the court agreed these warrants were lawful and justified in this case, and rejected each of the five grounds for which the review was sought.

"Our investigation into suspected tax fraud continues."

The club said: "We are disappointed with this decision given the court's findings. We are considering all of our options with our advisers, including whether to pursue an appeal."

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