It is understood that the UK's HM Revenue and Customs (HMRC) is investigating a number of professional football, cricket and rugby clubs in an apparent attempt to clamp down on the use of image rights to avoid income and other taxes.
According to tax investigation specialists Kinsella, HMRC is currently investigating all 12 Guinness Premiership rugby clubs and it is believed that County Cricket and Rugby League clubs are also under scrutiny. The firm believes that top football clubs could be the next big target for tax inspectors.
One rugby club official was quoted by the firm as saying that some clubs are facing "a potentially huge bill" if HMRC finds instances of image rights being paid in lieu of salary, thus avoiding PAYE (pay-as-you-earn) income tax and national insurance contributions. However, the official was of the view that investigations into rugby and County Cricket clubs would be a testing ground for tax inspectors to go after the much bigger fish of Premiership football clubs.
Image rights refer to an individual’s right to prevent unauthorized use of their name, likeness or any other personal attributes. Kinsella says that sports clubs pay players large sums of money, sometimes up to a fifth of their total salary, for the right to use their image in advertising and in general promotion of the club.
"There is a potentially huge, un-tapped source of backdated tax here," said Kevin Kinsella, Chief Executive of Kinsella. "There are examples where the image rights of a player are worth more to a club than their contribution on the field and so it is thought that HMRC might target those players, particularly when it moves on to the bigger football clubs."
Damien Hopley, Chief Executive of the Professional Rugby Players’ Association, is, however, undaunted by the prospect of the investigations. “The only issue we would have is if we felt unfair penalties were being imposed. All we want from HMRC is clarity," he commented.
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