HM Revenue and Customs (HMRC) carried out 246 investigations of footballers over their tax affairs in 2019/20, according to a freedom of information (FOI) by accountancy group UHY Hacker Young.
This is almost treble the number in 2018/2019 (87), as the UK taxman targets ‘image rights’ deals that are reportedly being used to avoid tax.
HMRC is targeting what it sees as “over-aggressive use of ‘image rights’ deals, in which players are paid additional money on top of their salary for use of their image by the team in advertising and endorsements”, UHY Hacker Young said in a statement.
Image rights
Money is commonly paid to a company set up by the player for this purpose and is only taxed at the 19% corporation tax rate, rather than the 45% income tax rate paid by high earners.
HMRC believes many of these deals amount to tax avoidance, particularly in cases where players who are not household names are paid a significant percentage of their compensation in image rights payments.
In some cases, image rights companies are based offshore, reducing tax paid even further.
Elliot Buss, partner at UHY Hacker Young’s Newport office, said: “HMRC believes that lots of lesser-known footballers are effectively avoiding tax by getting paid huge sums for image rights that HMRC views as overpriced.
“The image rights of the likes of Paul Pogba and Mohamed Salah are undoubtedly worth millions of pounds a year. However, if you are second-choice left back in the EFL Championship getting paid a great deal in image rights payments, then this is likely to trigger an investigation by the taxman.
“You may have to make a robust argument to HMRC to show how the value of the image rights has been arrived at.”
Agents and clubs
Football agents are also in the firing line for HMRC, with the number of investigations of agents more than doubling to 55 in 2019/20 from 23 in 2018/19.
HMRC is keen to uncover cases where agents’ fees from transfers, which are paid by players and can run to millions of pounds, are not declared correctly for tax purposes.
The tax authority “suspects that this is the case in many transfers”, UHY Hacker Young said.
In addition, HMRC opened 25 investigations into football clubs in 2019/20, up from 23 in 2018/19.
The UK taxman’s overall additional tax collected from investigations into professional football in 2019/20 was £73.1m ($95.6m, €81.2m), more than double the £35.3m collected a year earlier.
Not surprising
Andy Turner, a partner at accountancy firm Mercer & Hole, told International Adviser: “The Premier League has taken great strides to clean up football finances both at a club and player level, and the use of image rights deals is diminishing as many clubs, players and their agents do not want to adopt aggressive tax positions.
“HMRC does however continue to take an interest in players’ tax affairs. Players are enormously well-rewarded and rarely, if ever, think about their tax affairs.
“A house purchased whilst playing for a club may, for example, be rented out if then on loan to another club and is simply overlooked on any tax returns.
“Players are also often ill-advised making investments into schemes that are then questioned or investigated by HMRC. And then there is the question over the tax jurisdiction of foreign players in the UK. Understandably, they will rarely think about the tax implications of their actions.
“Football finances are complex so it is not entirely surprising that HMRC takes an active interest. Footballing authorities are taking considerable efforts to keep the sport financially clean and above board.”
