West Ham United co-owner David Sullivan has avoided paying £700,000 in taxes on his own family business by funnelling the money through the club, according to a court ruling.
Sullivan, 69, was ordered to pay that sum to tax authorities after the court ruled he deliberately tried to benefit from the transfer of £2 million in 2010.
According to the ruling, Sullivan's business, Conegate Ltd., bought £2m worth of shares in the holding company that owns West Ham. Those shares were then converted to "deferred shares" and sold back to the holding company for £1, thereby allowing Conegate Ltd. to claim a £2m loss on its taxes and reduce its payment by £700,000.
It is illegal to use financial losses to reduce the amount of tax owed if one of the main purposes of claiming the loss is to secure a tax advantage.
"We agree with [Sullivan] that the overarching reason for the transactions taking place was for [Sullivan] to provide funds to the football club," the ruling read.
"It is clear from our findings of fact that there was more than one way to provide funding to the football club and one of the reasons that Mr. Sullivan chose to provide funds to the football club in the specific way that transpired was so that [Sullivan] could claim a capital loss. Therefore, we consider securing a tax advantage to have been 'one of the main purposes' of the arrangements."
Sullivan, who with co-owner David Gold purchased controlling interest in West Ham in 2010, was estimated last year by The Sunday Times to have a personal wealth of £1.1 billion.
The ruling was publicised as London Mayor Sadiq Khan met Karren Brady, the club's vice-chairman, to discuss financial and safety issues at the London Stadium.
Khan, who has been critical of the stadium's operation since West Ham's tenancy at the former Olympics venue began in 2016, announced in December that his office would take control of the venue following an independent report into its costs to taxpayers.
A series of pitch invasions staged in protest of the club's governance -- as well as the swarming of the director's box, where Sullivan and Gold were sitting -- marred West Ham's defeat against Burnley on March 10. The game against Southampton on Saturday will be the first at the stadium since those events.
The club said afterward that 20 people were arrested and five supporters were banned for life from the stadium for their actions.
Despite the unrest, sources told ESPN FC earlier this month that West Ham were unlikely to face a ground closure or a points deduction because those sanctions, while available to an FA commission, are unprecedented.