Match of the Day pundit, Danny Murphy, is reportedly facing a £2.5 million tax bill, after a film investment scheme he put money into was the subject of an HMRC clampdown on suspected tax avoidance, it has been reported.
The Sun claims that the former Liverpool, Fulham and Blackburn Rovers midfielder was one of a large number of celebrities who had invested in Ingenious Media, a company that helped finance films. Investors became directors of partnerships in order to invest, which meant that any losses could be offset against their income - reducing their tax bills.
A number of high-profile people invested: David Beckham, Wayne Rooney, Steven Gerrard, Jeremy Paxman, Robbie Williams, James Dyson and MP Andrew Mitchell have all been named among the 1,300 investors over a decade.
However, last year HMRC investigated this sort of scheme - and concluded that they were set up with tax avoidance rather than film funding in mind, and implemented retrospective legislation outlawing them. It meant all investors had to pay back the tax they had saved over a number of years.
The company concerned believes the retrospective legislation is unfair. It insists that the scheme was run on a legitimate commercial basis in order to make profitable films, and has launched a tribunal case against the government. It is expected to rule next month.
The Revenue made an offer to investors in 2013, allowing them to settle for paying 40% of their tax bill. A number are thought to have taken the opportunity to settle before the tribunal started last November. However, The Sun claims that Murphy is not one of them.
If the tribunal finds in favour of the firm, this is a gamble that will pay off, because he won't have to pay the tax at all. If he loses, all the tax will be due. So it's a high stakes gamble. We'll just have to wait and see whether it pays off.
Murphy has not commented on the story.
Lessons for us all
Quite aside from the rights and wrongs of these sorts of schemes, the number of footballers who got involved in them reveals two powerful motivations when it comes to money - that can lead us all astray.
The first is the desire to trust someone else to worry about the details - so that we don't have to. In the footballers' cases they had advisers and professionals taking care of their money, and recommending these schemes. There's almost no chance that any of them asked the details, or understood them, but trusted those around them.
We are far less likely to have a bunch of highly-paid professionals advising us, but we still have to take care to understand the investment products we put our money in, or the risks we are taking with things like pensions and property. Otherwise we can walk blindly into problems too.
The second is the thought that if everyone else is doing something, we're safe to join them. The sheer number of footballers involved in film schemes, means they must have felt there was a certain safety in using a scheme that all their teammates had invested in too.
However, as their experience shows, there's no safety in numbers. If you are taking any comfort in the fact that no-one around you is investing in a pension, or that a friend has made a fortune by investing in a particular company, then stop right now. The herd mentality is genetically programmed in all of us, but in the world of money, when things go wrong, you'll be on your own.
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