A yellow card for footballers and their agents……let’s bring in another match official
The Professional Footballers’ Association (“PFA”) has waded in on the long running tension between HMRC and the way that footballers and their agents are remunerated. The PFA is pushing for a dialogue with HMRC to consider a joined-up approach to establishing some clear and agreed principles and parameters particularly in the realm of dual representation of agents. It has become quite common for an agent to act for both the club and the footballer (as specifically permitted by FIFA) when it comes to negotiating transfers. The agent will be compensated handsomely by the club on behalf of both the club and the player for his efforts. The footballer can mitigate the correspondingly hefty tax liability on the agent fee by treating it as a benefit in kind and the footballer is exposed to tax on only half of the total sum paid by the club given the fee is shared between both parties. Given the tax at stake, plus interest and penalties, if HMRC disagree with the position taken by the parties, any headway that the PFA can make will be most welcome and might avoid an emotional penalty shoot-out once an investigation is started.
HMRC have for a long time paid close attention to the tax compliance of footballers likely due to the huge sums involved. In the tax year 2018/19, 87 professional footballers were under investigation by HMRC, this rose to 246 for 2019/20. For agents, the numbers under investigation went from 23 to 55 over the same two tax years and for the clubs themselves from 23 to 25. The additional tax yield following the outcome of the investigations into footballers alone was over £73m in 2019/20.
As well as agents’ fees, image rights payments continue to be scrutinised by HMRC. Images rights payments can be substantial amounts paid to the player on top of salary for use of their image by the club or other parties for advertising and endorsements such as Messi’s controversial Danone/Adidas/Pepsi deals. As a form of intellectual property, the image rights can be owned by a UK company thus taxable at the corporation tax rate of 19% rather than at the 45% rate of earnings for additional rate taxpayers. For non-UK domiciled footballers paying tax on the remittance basis, image rights payments are often split between a UK and non-UK company sheltering an agreed proportion from UK tax entirely.
HMRC have always been uncomfortable with the agreed UK versus offshore split arguing that more falls in the UK tax net than has been declared as UK source hence it is vital that this split is properly documented and justified. HMRC also continue to challenge the commercial reality of the actual payment itself. Buoyed by recent successes before the tax tribunal in relation to their argument that the image right payment is essentially just additional salary and should be taxable as such, HMRC are certainly on the attack and footballers on the defensive. The pandemic adds to the Government’s need for cash so even if you thought it was all over, it’s not yet! Hopefully the PFA can make some inroads in agreeing a universally applied and accepted stance in relation to both agents’ fees and image rights payments but until then advisers must assume a robust and clearly established position and accept that the receipt of image rights payments over and above what a player’s profile might reasonably merit will be ripe for HMRC investigation.
The End is Nigh for the Non-Dom Regime
Published in ThoughtLeaders4 Private Client Magazine, Helen McGhee expert analysis of the current state of non-dom tax regime and it's future.
HMRC Makes Changes to COP9
On 14 June 2023, HMRC published a substantially rewritten Code of Practice 9 (“COP9”). Helen McGhee and Megan Durnford set out the key changes implemented as a result of this publication.
Pandora Papers: HMRC issues nudge letters
The Pandora Papers leak of almost 12m documents back in 2021 purportedly exposed the secret accounts and dealings (including potential tax evasion/ avoidance and money laundering) of 35 world leaders (including the late HM Elizabeth II), as well as many politicians and billionaires. The data was obtained by the International Consortium of Investigative Journalists in Washington DC and led to one of the biggest ever global financial investigations.
Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)
Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).
In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).1
HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).2 The UK was also a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and personal tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.
This article was first published with ThoughtLeaders4 Private Client Magazine
Tax-Related Measures in the Autumn Statement 2022
On 17 November 2022, the Rt Hon Jeremy Hunt MP, the Chancellor of the Exchequer, unveiled the contents of the Autumn Budget 2022. This comes after the International Monetary Fund (IMF) published its world economic forecast on 11 October 2022. The IMF expects the British economy to grow 3.6% in 2022 and 0.3% in 2023. Other major developed economies are also expected to stagnate next year, namely Spain (1.2%), the US (1.0%), France (0.7%), Italy (-0.2%) and Germany (-0.3%).
This note focuses on tax measures included as part of that statement.