14 October 2016
A running theme in my blogs (see my tax avoidance & evasion blog) is the confusion the media has with regards to tax – and any saving/avoidance thereof.
To add to this, I recently read an article on how footballers (although this topic is spread amongst rugby players, cyclists, cricketers etc) avoid tax by channelling a portion of their income through Image Rights companies. This essentially ensures that the portion channelled via Image Rights are taxed at Corporation Tax (20%) rates and not additional rate Income Tax (45%).
In regards to this, the media has put forward tales of ‘secret deals’ , ‘tax evasion’ and not so ethical clubs or advisers. However, as the chairman of UHY’s national sports group, this is an area in which I have been heavily involved, and I’m afraid it’s not as ‘juicy’ as the media may make it seem. So what are Image Rights?
Traditionally, the majority of sports clubs have remunerated players solely for their playing abilities; however, as the sports sector becomes ever more commercialised, this concept is changing and is doing so through the use of Image Rights. Cardiff Blues fans will remember Jonah Lomu playing in our great capital city for a season. I was one of 12,500 people who attended for his debut in Cardiff. The Arms Park hadn’t been sold out in years; so, do you think all these people turned up to see his undoubted playing abilities? Or the fact that he was the first ruby megastar?
I think we can all safely say that it was because he was Jonah Lomu and not because we thought he may change the way Cardiff were playing. So this leads us onto the use of Image Rights in this scenario. His deal was probably large and rightly so. It was large because he would sell tickets, shirts and get the buzz around Cardiff again. It is that portion of his salary which belonged to his image and not his playing abilities. In principle, clubs now purchase players not just based on their playing ability but their worldwide image and marketability. This means that a contract’s value can be increased as clubs can gain from their players image and the exploitation of it.
So, there we have it. No tax wizardry going on, just a realisation that players don’t just turn up for training or to play anymore. They have to do so much more than that and their image gets exploited as a result. Surely you would expect some kind of remuneration if someone exploited your image? Yes, so would I…
For further information on this blog post, or to discuss your specific circumstances in regards to Image Rights, please contact our sports specialist Elliott Buss or download our Image Rights explained fact sheet here.