UK tax authorities probed Manchester City in 2018 over whether it used complex arrangements to underpay tax, nearly a decade before the club was found to have breached the Premier League’s financial rules. HM Revenue & Customs opened a civil investigation into Man City’s tax affairs in the wake of the publication of a trove of leaked internal emails by Der Spiegel in 2018. The emails prompted a Premier League investigation into whether the club had manipulated its accounts and disguised funding from owner Sheikh Mansour bin Zayed al-Nahyan, a member of Abu Dhabi’s ruling family, as commercial revenue.
Last month, an independent commission found that Man City had artificially inflated its financial position by more than £900mn between 2009 and 2018 by arranging “sham” commercial deals. The club allegedly paid former manager Roberto Mancini through a consultancy agreement, which reduced its costs. HMRC’s earlier probe, which was never formally closed, was conducted under a so-called Code of Practice 8 [COP8] investigation — a civil inquiry used when the authority suspects complex structures for tax avoidance.
The club instructed external lawyers to advise it on the probe. Man City argued to HMRC that there was nothing untoward about its commercial arrangements. Government ministers believe the extent of the alleged financial irregularities will prompt HMRC to intensify scrutiny of Man City, which has won the Premier League eight times since 2009.
Dan Neidle, former head of tax at Clifford Chance, analysed the leaked documents and estimated a £12mn tax shortfall, including an alleged £8.86mn payment to Mancini through a sham consultancy arrangement.
Source: Financial Times Companies · Summarized by HeadlinesBriefing