On 16 November 2022, the former premier league and Norwegian international footballer John Carew was jailed in Norway for tax evasion. The Norwegian national was also sentenced to pay a fine of approximately £46,000. Carew had failed to report taxable income of around 12.8 million Norwegian Kroner (circa £1.07m) between 2014 and 2019 and had also failed to report assets worth more than 300 million Norwegian Kroner (circa £25m).
During the relevant period, Carew had submitted Norwegian tax returns which stated that he was resident in the UK for tax purposes. As a result of his status as a UK tax resident, Carew had taken the position that he was not liable to pay tax in Norway. It is not clear whether Carew filed his UK tax return as a remittance basis user or whether he was subject to UK taxation on his worldwide income and gains on an arising basis.
Under Norwegian tax law, anyone who is present in Norway for more than 183 days during a 12-month period is liable to pay tax in Norway. It appears that Carew was present in Norway for more than 183 days in each of the years between 2014 and 2019 and was therefore definitively resident in Norway under the domestic rules.
Carew did not contest that he had been present in the Norway for at least 183 days in the relevant years but explained that he had been acting on the advice of his former agent. In recognition that Carew had not acted with intent, the Court found that he had acted with gross negligence.
Lessons to be learned by players and agents
Carew appears to have been the victim of trusting an individual (his agent) who was not experienced in international tax planning and his predicament may have been caused, at least in part, as a result of the mismatch between the UK and Norwegian tax years (with the UK tax year running 6 April to 5 April and the Norwegian tax year following the calendar year).
In the UK, HMRC have started to look more closely at the arrangements of international sportspeople. We have seen them challenging the splits between salary and image rights payments (including the use of offshore structures for image rights payments) as well as the split in fees in dual representation agreements.
HMRC have also increasingly sent request for information letters to sportspeople – and football players are no exception – in instances where they had not received a tax return for the individual taxpayer as he had wrongly assumed that deduction at source by his UK employer (the English football club) would be sufficient in dealing with his UK tax and reporting compliance or had, once again, incorrectly relied on the automatic application of the remittance basis of taxation.
Mobile individuals who relocate to the UK or who leave the UK to relocate elsewhere should be encouraged to obtain coordinated tax advice in both jurisdictions so as to ensure that their tax affairs are in order, especially in the transitional year which can be a tricky one especially for the mismatch in tax years (as highlighted above).
When coordinated UK and foreign tax advice is received from suitably qualified experts, it may be possible to minimise the impact of taxation by actively seeking reliance on the relevant double tax treaty or to maximise the benefit of any available unilateral relief as well as domestic reliefs which are available to all UK resident individuals irrespective of their domicile status (such as spilt year treatment or tax credits) as well as claims which apply to non-UK domiciled individuals. A clear example is overseas workday relief which can be claimed for the first three years of UK tax residence in respect of remuneration received, for instance, from the national team for training and games played outside of the UK.
Given that they are in the spotlight, it is essential for footballers and another international sportspeople to get their tax reporting right both for reputational reasons and to ensure that they do not face financial or criminal penalties. Where a footballer believes or becomes aware that his compliance is not accurate so resulting in an underpayment of UK tax, a WDF may be a suitable tool to regularize his position and minimise penalties or, even worse, the matter becoming subject to a criminal investigation.
It is essential that players take proper tax advice when moving between jurisdictions so that they do not fall foul of the residency traps and equally they make good use of the reliefs available to them. Agents should also make sure they are aware of the risks, and they should advise their players to seek proper UK tax advice before any move between jurisdictions. As can be seen from the Carew case, a mistake can result in severe penalties no matter the intentions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.