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HMRC Will Dictate Outcome Of Footballers' Image Rights Battle - Tax Lawyer

Robbie Lawther

23 April 2018

The partner and head of business and property taxes at Howard Kennedy has said that HMRC holds the ultimate power in a major tussle around footballer’s image rights tax avoidance claims.

Recently, reports said that the UK's tax collector HMRC is investigating 181 footballers at 51 Premier League and Football League clubs in a huge probe into tax avoidance linked to image rights payments. HMRC struck a deal allowing clubs to pay 20 per cent of wages as tax-free image rights since the start of the 2014-15 season. But inspectors believe some may have been paying up to 60 per cent.

Leigh Sayliss, partner and head of business and property taxes at Howard Kennedy, spoke to this publication surrounding the complexities of image rights in the sporting world.

“HMRC's problems with the image rights of sportsmen go back to late 90s/early 00s,” said Sayliss. “Arsenal made two separate payments to two of their players, David Platt and Dennis Bergkamp. One payment was for playing football; the other allowing the club to exploit their names, reputations, images, voices, etc. When HMRC tried to claim that all the money should be taxed as employment income, the tribunal agreed with the players' claims that payments for image rights were different to earnings from playing and should be taxed differently. That difference is significant.  Earnings from playing will be taxed at up to 47 per cent (income tax plus NICs for the player) with an additional 13.8 per cent in NICs for the club.  In contrast, image rights will be taxed at 19 per cent if paid to a UK company – for an international player, they could be outside UK tax altogether if paid to a non-UK company in the right country.”

Sayliss added: “It is important for clubs and players to understand that payments for image rights must be realistic and genuinely for those rights. The image rights of a new recruit from the junior squad will not be as valuable as those of a well-established international signing – paying the same proportion of wages to the two players for those rights may not ring true.  Also, there is no point paying for something that you will not use so clubs should make use of the rights for which they have paid – or else HMRC will doubt that they were truly valued. Apart from this, within the above guidelines, it is now a waiting game whilst HMRC review the information it is gathering.  In the long run, HMRC hold all the power.  Unlike on the field, HMRC are ultimately able to place the goalposts wherever they want them.”

The Sun said that the tax authorities are also investigating 21 agents who may be linked to schemes.

Reports state inspectors have recovered £300 million ($430 million) over the past two years after a crackdown on image rights.

“We are clear that everyone must pay their fair share of tax,” Penny Ciniewicz, a spokesperson from HMRC. “HMRC is relentless in pursuing those who don’t play by the rules.”

This publication has regularly reported on the image rights tax avoidance crackdown in Spain surrounding a host of big names in the world of football including Lionel Messi and Cristiano Ronaldo.

Most recently, in March, this publication reported that former Liverpool and Real Madrid footballer Xabi Alonso is facing a possible five-year jail term after Spanish authorities accused him of tax fraud.