Publication featured in The Times, CityAM and Accountancy Daily
HMRC’s tax crackdown on football has continued with £67.5m* in extra tax recovered from tax investigations into clubs, players and agents in just the last year.
In the year ending March 31 2024, HMRC opened investigations into 20 football clubs, 83 football players, and 21 football agents. Over £384m in unpaid taxes has been collected as a part of these crackdowns in the last five years.
The football industry has long been the subject of tax investigations both in the UK and abroad. That is partly due to a basic lack of knowledge amongst players regarding their tax liabilities but also a tendency for tax schemes to go “viral” within the industry such as the misuse of image rights.
High profile footballers such as Lionel Messi and Javier Mascherano have been convicted of tax evasion offences and 129 footballers were investigated by HMRC in relation to film finance schemes.
One of main targets of current investigations is what HMRC considers to be tax avoidance related to agents’ fees.
In May 2024, HMRC published new guidelines aimed at stamping out tax evasion through what are known as ‘dual-representation contracts’. It believes these arrangements cause significant losses in income tax, VAT, and National Insurance Contributions.
Dual-representation contracts are where a football agent claims to work for both the club and a player in a transfer, meaning the agent’s fee is paid by both parties. HMRC believes that in reality, the majority of agents work primarily for the player. This means when the club pays a large proportion of an agent’s fee, it amounts to a benefit in kind paid to the player – on which income tax is due.
HMRC’s new guidelines say that it will no longer accept a 50/50 split of agent’s fees as the ‘standard approach’. From now on, if a club claims that an agent also worked for them in a transfer, it must provide evidence to prove it. If it cannot, the agent’s fee will be deemed to be 100% paid by the player.
Nicholas Maytum, a UK based football agent who has worked with some of South America’s rising stars such as Gustavo Viera appeared on HMRC’s list of deliberate tax defaulters this July, for liabilities of over £740,000.
Elliott Buss, partner in our Newport office, says: “HMRC see the football industry as an obvious target for collecting unpaid tax.”
“Agent fees have long been a target for HMRC. It sees them as very simple tax evasion. Everyone in football needs to be aware that HMRC will be investigating any transfers where agent fees are not reported correctly – and handing out fines.”
Elliott Buss says that tax investigations in football are also triggered by:
- Clubs and agents failing to inform young players – often aged under 18 – that their salary of more than £150,000 means they need to file a tax return. Younger players will often have had no experience with tax, and therefore unaware of their responsibilities and fail to file, triggering investigations and penalties
- Players coming forward to HMRC to settle historic tax avoidance schemes: These were common in football during the 2000s and many older players are now paying unpaid tax bills and penalties to HMRC
- Over-aggressive use of ‘image rights’: HMRC accepts players’ limited companies being paid by clubs for the use of their images – and only paying 25% corporation tax rather than 45% income tax on that. However, it frequently investigates in cases where it believes the player’s image rights are without value – such as in the case of lower-league players with little name recognition
- Misclassification of contractors: HMRC is investigating clubs classifying some workers – such as medical teams – as self-employed. This reduces tax bills but HMRC uses rules known as IR35 to investigate and fine clubs who do it incorrectly
* Source: HMRC
