UK taxman cracks down on professional footballers using image rights as loophole

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Peter Powell/Pool Photo via AP

The number of professional footballers being investigated by Britain’s tax authorities has almost trebled in the past year, according to an accountancy firm.

Her Majesty’s Revenue and Customs (HRMC) is currently investigating 246 professional football players, up from 87 in the 2018/2019 season, UHY Hacker Young revealed in a report.

The tax agency is focusing its investigations into “image rights” deals which it believes are used to avoid tax.

These deals see players receive additional money, on top of their salary, for use of their image by the team in advertising and endorsements.

To receive that money, footballers usually set up a company and are thus taxed at the 19 per cent corporate tax rate instead of the 45 per cent income tax levied on high earners.

Britain’s Customs and Excise authority thinks many of these deals amount to tax avoidance, especially for players who are not household names but who receive a significant percentage of their compensation in image rights payments.

Some of the companies set up by players are also based offshore, reducing the amount they pay in taxes even further.

“The image rights of the likes of Paul Pogba and Mohamed Salah are undoubtedly worth millions of pounds a year,” Elliot Buss, a partner at UHY Hacker Young said in a statement.

“However, if you are second-choice left back in the Championship getting paid a great deal in image rights payments, then this is likely to trigger an investigation by the taxman. You may have to make a robust argument to HMRC to show how the value of the image rights has been arrived at,” he added.

Players are not the only one under the British taxman’s radar.

The number of investigations launched against football agents has more than doubled to 55 in the 2019/2020 season from 23 in the previous one.

Here, HMRC is targeting agents’ fees from transfers that may not have been declared correctly.

These fees are paid by players but, according to Buss, “despite having a very substantial income, many young footballers don’t get the advice they need when it comes to tax.”

“Often they don’t realise they need to pay tax on the fees that the club pays the agent on behalf of the player when they sign a new contract. That frequently results in errors, investigations and hefty penalties,” he explained.

Twenty-five investigations have also been opened into football clubs, up from 23 in the previous season.

Britain’s tax agency has so far collected £73.1 million (€81.3 million) as a result of investigations into professional football in 2019/2020, more than double the £35.3 million (€39.2 million) clawed back a year earlier.

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