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HMRC Focusing On Image Rights Tax Avoidance

by Jason Gorringe,, London

29 October 2018

The UK tax agency has confirmed that it is investigating around 170 professional soccer players' tax affairs and around 20 football clubs, focusing on the taxation of image rights.

The relevations are the result of a Freedom of Information request by accountants UHY Hacker and Young. It said that the number of players under investigation has increased by 90 percent since September 2017.

The firm noted that "image rights enable players to exploit their image for commercial value through sponsorships and endorsements. Since 2000, players have been able to treat income from playing and income from image rights separately, allowing them to establish image rights companies to receive this income. Whilst a player's wages will be taxed at standard rates, any fees paid to an image rights company will be taxed at corporation tax rates, currently 19 percent."

Nick Hall, Tax Manager in UHY Hacker and Young's Manchester office, said: "HMRC's focus on the football industry has been sharpened since a 2017 House of Commons Report concluded that tax avoidance in the sport was becoming widespread."

"Dawn raids on two Premier league football clubs last year over suspected tax avoidance offences also put the tax affairs of players under the spotlight."

"From what we are seeing, we expect many more than 198 football players to be on HMRC's radar as these figures only relate to open inquiries. Players need to be careful as tax investigations can be hugely damaging both financially and reputationally."

"The excessive use of image rights to avoid tax is not a problem exclusive to the UK – two high-profile players in Spain were handed suspended prison sentences in 2016 and just last month another player was given a four-month suspended sentence and GBP670,000 fine."

"Handled correctly, image rights companies can form part of a responsible tax plan for players. However, the tendency of some to push the boundaries has led to HMRC paying close attention to these structures, alongside other key areas such as payments to agents."

Separately, HMRC confirmed the probes, a spokesperson stating: "We carefully scrutinize the individual arrangements between football clubs and their players to make sure the right tax is being paid in the UK. HMRC is currently making inquiries into 171 footballers, 44 football clubs, and 31 agents for a range of issues, including image rights abuse. HMRC rigorously enforces the rules and has brought in GBP332m in extra tax by tackling non-compliance in the football industry."

TAGS: compliance | tax | tax avoidance | corporation tax | United Kingdom | fees | tax rates | Spain | Tax

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