It sounds like the title of a Famous Five adventure. The only question being, which one out of Doncaster, Lawwell, Thompson, Milne and Petrie should play the part of Dick. There are certainly a few candidates for Timmy the dog.
As we all now know, since 1999 the SPL declared income of £231million, of which it paid about £188million to the clubs, but the SPL did not pay one penny in corporation tax. Many have been shocked by the immorality of such a set-up, and appalled by the hypocrisy of the SPL’s relentless hounding of Rangers.
Despite some rabid comments to the contrary, at no time was it stated that £100million was de facto due by the SPL. Instead, this is a question of morality, a concept with which many of our separated brethren are seemingly unfamiliar.
The most recently published balance sheet of the SPL to 31 May 2011 showed net liabilities of £196,000. In other words, its liabilities exceeded its assets by £196,000. Such a bust balance sheet can be described as being technically insolvent. Its accounts have declared net liabilities since at least 1999, and indeed its balance sheet has worsened every year (bar one).
Why is this?
Every year the SPL doesn’t just pay out its “profit” to the clubs - it pays out even more than the “profit” it makes. It pays out so much in fact that it makes a loss year after year. The SPL made a loss in 11 out of the last 12 years.
Here is what Margaret Hodge, chairman of the PAC, stated last week in relation to Starbucks: “I just don't believe any corporate entity would sustain losses for 15 years and stay in UK.” She went on to say it: “just doesn't ring true" and could only be a tax dodge.
So why does the SPL deliberately make a loss each year?
Accounts profit and taxable profit are not the same thing. A company might spend money which reduces its accounts profit, but which is not tax deductible and so does not reduce its taxable profit. Common examples would be entertaining, capital expenditure, and some legal fees.
So the SPL could break even (i.e. pay out all its “profit” to the clubs) but still have a tax charge because of, say, entertaining costs that it would not get a tax deduction for. Instead, what the SPL does is deliberately make a loss so that its taxable profit (after adjusting for non tax deductible expenses) is zero.
In order for any expense to be tax deductible it needs to be incurred “wholly and exclusively for the purposes of the trade”. The “extra” amounts paid out to the clubs over and above the “profit”, has nothing to do with the purposes of the trade, and everything to do with “dodging” tax. And they cannot be described as “exclusively” for the trade when they are apparently just a way to eliminate tax.
There is a prima facie case that the only purpose is to create an artificial loss so that zero corporation tax is paid. This alone would give HMRC an opportunity to revisit all the payments to clubs in order to ascertain their true nature, and to see whether any rules have been breached. Remember that even a minor breach could have catastrophic consequences.
People can judge for themselves whether it is morally right that the SPL can deliberately incur losses year after year so that not one penny of corporation tax get paid to fund schools, hospitals, nurses and teachers.
As Margaret Hodge stated: “I think one should boycott these companies. I do actually think that is the right thing to do.”
I agree. The SPL clubs have allowed the Fatuous Five (Dick, Dick, Dick, Dick and Dick) to decimate their income streams for many years to come.
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