Manchester City’s long-running financial case has moved beyond the football authorities, with British lawmakers asking the country’s tax agency to examine whether the club’s dealings could have resulted in unpaid taxes.
The development follows an independent commission’s finding that City breached Premier League financial regulations across the period from 2009-10 to 2017-18. City denies wrongdoing and is expected to appeal the decision by the October 2 deadline.
The Premier League case has now opened another front after Dame Meg Hillier, chair of the UK Parliament’s Treasury Committee, wrote to HM Revenue and Customs seeking clarification on whether the tax authority has reviewed material contained in the commission’s findings.
The committee oversees the administration and policy work of HMRC. Hillier said she wanted reassurance that the tax implications of the case were being given appropriate attention.
Why HMRC is interested
The tax questions centre partly on payments made during Roberto Mancini’s time as Manchester City manager.
A report by Tax Policy Associates alleges that a consultancy arrangement involving Mancini resulted in as much as £12m in unpaid UK tax, although the organisation stressed that its assessment is preliminary and based on the commission’s findings, leaked documents and the heavily redacted decision currently available.
The organisation argues that payments presented as consultancy fees were actually part of Mancini’s remuneration for his work as City’s manager and should therefore have been subject to UK income tax and National Insurance.
It estimates that, if its interpretation is correct, tax, interest and potential penalties could take the total liability to roughly £23m-£24m.
Those figures are not an HMRC assessment and should not be treated as an established tax debt. Tax Policy Associates itself says it does not know whether HMRC has conducted or concluded an investigation.
The sponsorship dispute
At the heart of the Premier League case is the commission’s finding that City artificially inflated its commercial income through sponsorship arrangements connected to its Abu Dhabi ownership.
According to the commission, City recorded substantial sponsorship payments as commercial revenue while funds from Abu Dhabi United Group, the club’s owner, were allegedly used to supplement payments made by sponsors.
The commission concluded that about £830.69m of sponsorship revenue recorded by City over the period came from ADUG rather than the sponsors themselves, according to published accounts of the ruling.
The club has rejected that interpretation.
As part of its expected appeal, City is preparing to argue that key sponsorship payments were funded by the Abu Dhabi government, rather than ADUG.
That distinction is important because Premier League rules permit sponsorship by state-owned entities. City’s case is that the sponsors were responsible for their contractual payments and that, where they sought financial assistance, that support came from the Abu Dhabi government rather than City’s private owner.
The independent commission rejected that explanation, describing it as an account developed after the events in question and finding that the alleged disguised funding arrangement existed.
What Next?
Manchester City has consistently denied the Premier League’s allegations. Following the commission’s decision, chairman Khaldoon Al Mubarak said the club possessed what he described as “irrefutable evidence” supporting its position.
City has also argued that the commission’s decision contains significant errors of fact, law and principle and has indicated that it will challenge the findings through the appeal process.
No sporting punishment has yet been imposed as the appeal process remains outstanding.
The outcome of that process will determine whether the commission’s findings stand and what consequences, if any, follow from them.
The controversy has also drawn a response from Etihad Airways, one of City’s principal sponsors.
The Abu Dhabi-based airline has said it is considering legal action over what it regards as damaging implications arising from the publication of the commission’s findings.
Etihad has rejected any suggestion that it was involved in improper commercial arrangements.
That dispute adds another dimension to a case that has already raised questions about the relationship between football clubs, private ownership, state-linked businesses and sponsorship revenue.
