HMRC Target Footballers, Agents And Clubs In New Wave Of Investigations

• Published date: 12 August 2020
• Subject Matter: Tax, Corporate Tax, Tax Authorities
• Law Firm: Charles Russell Speechlys LLP
• Author: Mr Hugh Gunson

New figures show that HMRC are ramping up investigations into footballers, agents and football clubs. In particular, the number of investigations into footballers has tripled in the year to March 2020. The main areas of focus are payments made for players' image rights and the tax treatment of agents' fees.

Image rights arrangements take various different forms, but essentially they involve payments made by clubs and others for the right to exploit the image of a footballer for advertising, endorsements and other similar purposes. The image rights themselves are often owned by a special purpose company, with the intention that they are taxed at the UK corporation tax rate of 19%, rather than at the 45% rate of earnings for additional rate taxpayers. For non-UK domiciled footballers who claim the remittance basis of taxation, image rights payments are often split between UK and offshore companies, with the offshore element attracting no UK tax and very little (or no) tax in the offshore jurisdiction.

HMRC's basic argument is often essentially that the image rights payments (or a proportion of them) are in reality payments of salary and should be taxed as such, at the higher rate. For split UK/offshore structures, HMRC may also challenge whether payments to the offshore company are in fact "UK source" and so should be taxable in the UK.

Key issues in any such investigation are likely to include the commerciality of the arrangements and the justification behind them. It will be important to review in detail the underlying contracts and documentary and witness evidence and ensure this is appropriately presented to HMRC in the context of an investigation. For example, household name footballers may well have very valuable image rights; but the same may not be true of lesser-known players. Some of these issues were explored in a recent tax tribunal...