It’s been reported in the press this week that HMRC tax investigations into football clubs have yielded an additional £59m of tax in the year to 31 March, a 30% increase on the £45m the previous year.
Professional football is an area in which HMRC suspects compliance with tax rules is poor and it has targeted football clubs, players, and agents for investigations.
Reports suggest that HMRC has placed a particular focus on fees paid to agents going untaxed and on payments for hotels and flights for family and friends of footballers. It has suspected poor compliance with tax rules within the professional football sector for a while and is now targeting those involved.
HMRC’s concerns
HMRC is concerned that football clubs are underpaying in NICs on agents’ fees, ‘image rights’ payments and ‘benefits in kind’ made to players through things such as complimentary hotel rooms and flights.
Agents’ fees
In the area of agents’ fees HMRC believes that football clubs are underpaying national insurance where the club pays a large percentage of an agent’s fee. It thinks that agents will inevitably work primarily for the player. If a club is paying for what is really the player’s share of the agent’s advice, then that is a “taxable benefit”.
HMRC believes clubs should be paying national insurance on this payment but often don’t.
Image rights
Image rights payments are usually made by clubs to a player’s company, which means that the club does not have to pay national insurance on those payments.
However, where HMRC believes that the actual value of those image rights is lower than the amount the player receives, they will consider this disguised remuneration and therefore subject to national insurance.
Benefits in kind
HMRC is also focusing on ‘benefits in kind’ where a club will pay for plane tickets and a hotel stay for a player’s family. These are often not declared as a payment to the player, meaning that the football club may have underpaid national insurance on the value of those benefits.
HMRC’s stance going forward
HMRC has now made clear that it will not accept a 50:50 default split of an agent’s fees. Football clubs will have to prove, to HMRC’s satisfaction, the split adopted in transactions setting out the provision of services to the football club and to the player, has been correctly apportioned.
Expect HMRC to closely look at image rights and benefits in kind too.
Fines and penalties
Over the past 15 years, HMRC has launched investigations against many football clubs, including Rangers, Newcastle United, Manchester United and West Ham United.
Recent actions where HMRC have been successful include a £343,728 fine against former Manchester City manager Manuel Pellegrini, for allegedly evading £816,579 in tax.
Former Liverpool and England striker, Emile Heskey received a £41,933 penalty for evading £92,161 in tax payments.
Going forward
HMRC is focussed on the football industry and looking to recover what it regards as potentially large amounts of unpaid tax. Football clubs should seek professional advice to make sure they are complying with all relevant rules and regulations to avoid fines and penalties.
Get in touch
Cowgills is a leading independent firm of Chartered Accountants and Business Advisors based in the North West of England – from Greater Manchester to Liverpool. We use our sector experience to deliver tailored financial solutions and support for businesses.
If you need help with any tax issues, get in touch with your Cowgills contact or visit our website.
Disclaimer
The information was correct at time of publishing but may now be out of date.
