UK Tax Vehicles Could Face Scrutiny If Beckham Wins Pay Deal

by Robert Lee, Tax-News.com, London

26 April 2002

A Financial Times report on Wednesday revealed that tax minimisation vehicles commonly used by well-known sporting professionals in the United Kingdom could come under increased Inland Revenue scrutiny, if Manchester United player, David Beckham, secures a lucrative separate 'image rights' deal with the club.

The England captain, according to reports, has been in negotiations with Manchester United over the right to establish an 'image rights' contract to run alongside his salary. If the player secures such a deal, image payments will undoubtedly be made to one of the companies established by Beckham to exploit his 'brand' name.

Such personal service companies are common amongst sports stars in the UK, and although those based in the country cannot now escape income tax on salaries and dividends drawn from the company, payments are free from national insurance payments - a far greater draw since the introduction of the limitless extra penny in Gordon Brown's latest budget.

The FT reports that the use of personal service companies to minimse taxation has long been a concern of the Chancellor's, and indeed the introduction of IR35 legislation - designed to stop footballers, journalists, and IT consultants from disguising salary as freelance income in order to reduce taxes - bears this out.

However, some experts believe that the new laws have made it easier for sporting professionals to establish tax reducing vehicles by outlining exactly what is, and isn't permitted.

Speaking to the Financial Times, former Chelsea player Steve Wicks, who now fronts a celebrity management company, explained that: 'There were loopholes in the past but those loopholes have been filled. It's more transparent now whereas there used to be shades of grey.'

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