Publications featured in include: The Sun, City AM, Taxation, International Adviser, Accountancy Daily, The Mirror and Accountancy Today.
According to data provided by HMRC to UHY, HMRC has uncovered £5.8m in tax owed by players and £4.8m owed by agents in the last year. Over the past year HMRC has opened compliance investigations into nine football clubs, 93 football players and 23 agents.
HMRC is increasingly targeting agents’ fees. These fees are money that agents are paid by the football club and player to manage a transfer – which can be in the millions. In April this year HMRC published new guidance on agents’ fees which suggested the tax authority was gearing up for a major campaign against agents.
The number of players which have been investigated is equivalent to more than eight starting line ups (of 11 players).
Elliott Buss, Partner in our Newport office, says “HMRC sees the football industry as an area where there is a great deal of unpaid tax owed by extremely high earners.”
“Despite HMRC’s capabilities being stretched over the past year, they still identified a significant sum in unpaid tax from the football industry totalling £55.6m.”
“HMRC increasingly targeting agent’s fees is a clear signal that they think this is an area where too much tax is going under paid.”
Agents’ fees are often split 50/50 between the club and player – however, the club will normally pay the player’s half. The player must pay tax on their half of the agents’ fees, as it is treated as a benefit in kind.
In most cases the agent does far more work for the player but a 50/50 split means the player’s tax bill is less. HMRC has previously voiced concerns that this 50/50 split was being exploited. It has now demanded that agents’ work for the club is properly accounted for, or the fee is split in a more representative manner.
HMRC is asking clubs and agents for evidence of their relationship in the transfer process. In particular they are requesting records to be kept, including letters between the agent and club, texts and emails, and WhatsApp messages. These records will be used to determine the relationship between the agent and club, and whether the split is justified.
The other area where HMRC are looking to uncover unpaid taxes is in ‘image rights’. It is common for top sporting stars to set up a company for the sole purpose of selling their image (e.g. for sponsorship deals). These companies will only be taxed at the 19% corporation tax rate, rather than the 45% income tax rate paid by high earners.
Elliott Buss adds: “A longstanding focus of HMRC’s has been footballers’ use of image rights.”
“It is understandable that the likes of Marcus Rashford or Harry Kane would utilise a company to sell their image – as their “image” will be in high demand amongst advertisers. However, players who have near to no brand recognition are seen by HMRC as using image rights as a way to avoid paying tax – and that is why HMRC is actively investigating the use of image rights in football.”