The issue centres around how clubs use image rights of players to take advantage of differences between corporate and income tax rates - which can equate to big amounts given the high salaries some top-level players are paid.
UK tax authorities dramatically increased the number of footballers it probed in the 2019-2020 tax year, rising to 246 from 87 a year earlier, a report highlighting how this group is being increasingly targeted, said.
The data comes from accountancy firm UHY Hacker Young, according to media reports. WealthBriefing has contacted the firm to confirm the figures.
The probe centres on how the players’ image rights are being used and how they are paid. For years, the tax affairs of footballers in different countries have been the subject of criminal investigations. Several prominent players, such as Argentine ace Lionel Messi and Portugal’s Christiano Ronaldo have faced charges. In June 2018, Ronaldo accepted an €18.8 million ($22.1 million) fine and was given a suspended jail term to settle charges against him. In July 2017, Messi avoided a 21-month prison sentence by agreeing to pay €252,000, equating to €400 for each day of the sentence.
Image rights allow a club to use the name and image of a player (as well as the actual individual when appropriate) to market and sell the club’s wares and those of their sponsors. While a player’s salary, in the Premier League and Championship, will be levied with a 45 per cent income tax charge, image rights are taxed at the 19 per cent corporation tax rate – creating an obvious way for clubs to arbitrage the tax code.
This news service has written about the financial problems professional sportsmen and women encounter, often aggravated by a short earnings window and advisors and agents exploiting young adults who are not financially savvy. (See this article here from 2018.)
(Editor’s note: What this controversy might also suggest is that there is a strong case for the UK government, particularly if it wants the UK to remain a magnet for foreign sports stars after Brexit, to create a simpler tax code so that there is less need or temptation to finagle differences in tax rates, as this situation demonstrates.)