Colin Senez, an associate at boutique private wealth law firm Maurice Turnor Gardner LLP, talks us through the Messi tax case.
It’s the Euros! Remarkably, I am still enjoying the tournament – even though I have managed to get every single one of my predictions wrong, so far.
I am unashamedly a football fan, basking in the performances of Lionel Messi, for which there are not enough superlatives to describe his exploits on the pitch. However, lately I have been distracted not by his prowess on the pitch, but rather by his legal team in his well-publicised trial for alleged tax fraud in Spain.
Lionel Messi and his father Jorge, who manages his finances, are accused of defrauding the Spanish revenue authorities of €4.1 million (£3.2 million). The authorities allege that the two used tax havens in Belize and Uruguay to conceal earnings from image rights. They both deny the charges and the trial is currently ongoing.
So, what is Lionel Messi’s primary defence? That he did not know what he was signing and he trusted his father and his advisors completely. As Messi told the judge ‘I only worried about playing football’.
Rewind about four years, and we are with Harry Redknapp at Southwark Crown Court, where he was eventually acquitted of charges relating to payments worth £189,000 into an offshore bank account in Monaco that the prosecution alleged were work-related bonuses arising from the sale of striker Peter Crouch.
So, again, what was his defence? In part, that he himself did not manage his financial affairs; he said ‘my accountant runs my life, I don’t have wage slips, I have not seen a wage slip in ten years. I don’t see bank statements.’
Now fast forward just a little, and in August 2014 the Treasury announced its intention to create a new 'strict liability' criminal offence of failing to declare taxable offshore income and capital gains.
Broadly speaking, a strict liability offence is where the prosecution do not have to prove that the accused had a ‘guilty mind’; the mere act is sufficient for prosecution – like speeding (or, very loosely, being offside). In other words, the prosecution would not need to prove anyintention of defrauding HMRC, but the mere act of not declaring offshore income and capital gains is enough.
Back to the present day, and the strict liability offence has been included in the Finance Bill 2016 and the proposal is that an individual will be liable to fines or a six month custodial sentence if they fail to declare offshore tax due. However, there will be a minimum annual threshold amount of £25,000 of under-declared tax. This would suggest that this arguably draconian measure is targeted towards the wealthier end of the spectrum.
HMRC have indicated that prosecution 'will be reserved for cases where HMRC needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.'
The offence will not come into effect before April 2017 at the earliest, so no strict liability offence will arise until after 31 January 2020 (the end of the period for correcting a 2017-18 self-assessment tax return), and guidance should be available closer to the time when the offence is introduced.
It will be interesting to see how the Spanish court responds to the Messi case, and in the meantime – I will work on honing my football prediction skills. France to win.