Pogba-style arrangements tackled in Jersey company crackdown

Monday 12 November 2018

A Jersey arrangement that allows one of the world’s most expensive footballers to pay minimal tax on money earned through his image will come under closer scrutiny under new government plans aiming to clamp down on ‘shell’ companies.

The External Relations Minister, Senator Ian Gorst, last week published guidance about his plans to clamp down on companies with no “economic substance” registered in Jersey to take advantage of the island’s favourable tax conditions.

The proposed new legislation is part of a bid to get the island off the European Union’s ‘grey list’ after concerns were raised over whether Jersey had the potential be used to facilitate tax evasion or money laundering. There is no suggestion at all of any wrongdoing in the Pogba case. 

If approved by the States Assembly, the plans would see Jersey-registered companies forced to prove that they are not ‘shells’, but genuinely conducting business in the island. 

Those that fail to meet the “economic substance test” could face “robust and dissuasive” penalties of between £10,000 and £100,000 or even risk being struck off the companies register, while individuals that fail to provide accurate information about the operation of locally-based companies would be hit by fines of around £3,000. 

Pictured: Companies not demonstrating substantial economic activity could face a fine of up to £100,000.

While the rules apply to all companies, the latest guidance on the proposed new law published by the External Relations Department places particular emphasis on the lesser-known area of “high risk intellectual property.” 

In the eyes of the suggested law, this would mean any company profiting from the rights to an aspect of intellectual property it didn’t create and connected to a person or entity outside of the island.

This would include the ‘image rights’ of people, including Manchester United footballer Paul Pogba, whose name and image were previously revealed by ‘Football Leaks’ to be registered as international trademarks to a Jersey company at the request of his agent Mino Raiola.

Esplanade-based Aftermath Ltd was set up in February 2016 to register the French midfielder’s brand and prevent others from profiting from his name in over 200 ways, including using it on skis, fishing rods, beer and Christmas tree decorations. 

Pictured: Aftermath Ltd - the company holding Pogba's image rights - is registered in St. Helier, Jersey.

The key factor, however, is that Pogba – once the world’s most expensive player – can benefit from Jersey’s tax arrangements on the millions he earns each year from the commercial use of his image, which included the creation of an emoji last year.

‘Football Leaks: The Dirty Business of Football’ – a book published last year – estimated that the amount being paid into Aftermath Ltd each year was around £2.87million, rising to £3.13million if his team qualifies for the Champions League.

While there was no suggestion of wrongdoing by either Pogba or his agent, the emergence of the footballer’s tax arrangements raised eyebrows among European Commission officials, and, alongside the Panama and Paradise Papers stories, is believed to be one of the reasons Jersey was threatened with being blacklisted by the EU.

Express research found that Aftermath Ltd is still active at the present time. 

Pictured: Paul Pogba, who plays for Manchester United, is among the most expensive players in the world.

If approved, the Draft Taxation (Companies – Economic Substance) (Jersey) Law will see companies forced to provide:

• “Detailed business plans which clearly lay out the commercial rationale for holding the Intellectual Property asset(s) in the Island;
• Concrete evidence that the decision making is taking place in the Island, and not elsewhere;
• Information on employees in the Island, their experience, the contractual terms, their qualifications, and their length of service.”

A recent guidance note stated that “periodic decisions by non-resident directors or board members, or local staff passively holding intangible assets” would not be considered enough ‘substance’ to justify a company’s presence on the island.

States Members will debate the plans on 4 December. 

It is believed that administering the law would cost the Taxes Office around £50,000 next year for systems upgrades, and that more staff would be needed from 2020 to assist with the increased compliance activities.

Lead photo: Paul Pogba's image rights are reported to be held in a Jersey company. (Antonio Calanni/PA)