Both clubs had their offices raided early on Wednesday morning with Toon chief Lee Charnley arrested for his dealings
WEST HAM and Newcastle could face points deductions if found guilty of serious tax fraud.
But any punishment is likely to be years down the line given the complex nature of such investigations – and much will depend on exactly what the clubs and their past or present employees are alleged to have done.
So Newcastle’s promotion back to the Premier League and West Ham’s probable survival are not under immediate threat.
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At the turn of the decade the Premier League is believed to have paid HMRC £50m of central TV money to settle tax, VAT and National Insurance irregularities on behalf of a number of clubs.
But this time HMRC have decided to investigate.
The football authorities will almost certainly wait for the taxman and the police to complete their investigation, which will give them time to consider the situation.
The alleged offences would be serious enough to merit an independent disciplinary commission under Premier League rules.
The penalties open to such a panel range from a slap on the wrist to fines and transfer bans, or, in the most serious cases, points deductions.
When West Ham breached rules on third party influence in relation to the signings of Carlos Tevez and Javier Mascherano in 2006, the club still escaped with a fine.
Although HMRC have not commented, it appears the investigation centres on transfers between England and France.
Scandals in the past have involved paying inflated fees to agents, who would then pass on a big chunk to players net of tax – basically, a hidden signing-on fee – although we do not yet know what the clubs have been accused of in this case.
A huge scandal erupted in France in the 2000s on this very issue and led to years of criminal investigations which ultimately produced few results.
Another issue that arose in the past was to give players huge image rights deals in return for using them in club merchandise.
Players tend to put those rights into separate companies which pay a rate of tax below the 45 per cent top rate on everyday salaries.
But HMRC long ago queried the system of paying players lower salaries and then topping them up with image rights deals which were far bigger than the players’ profiles could justify.
Portsmouth were among the clubs to be hauled across the coals by the taxman for dodgy image rights contracts and it was Pompey’s tax debts which ultimately drove them into administration.
It would be a surprise if clubs thought they could still get away with such schemes.
So the issue at the heart of the new probe could be the declaration of agent payments.
Clubs can claim that they are paying an agent for working for them rather than a player in a deal.
If the club pays an agent for work done on a player’s behalf in the negotiations, that sum has to be declared as a benefit in kind on the player’s annual P11D form and also has National Insurance implications.
Because so many deals involve the same agent acting for the buying club and for the player, clubs can confuse what was really a payment on the player’s behalf by claiming all or part of the agents fees were related to work done for the club instead.
As an added bonus, clubs can also claim back the VAT on payments to agents for work done for them.