HMRC 1- Footballers 0: Footballers exploiting tax loophole

August 18, 2020

2 min read

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What's going on here?

A Partner at law firm Hacker Young has found that the number of Footballers being investigated by HMRC is on the rise in the tax year 2019-2020 as footballers appear to be exploiting a tax “loophole” via inflating their image rights fees.

What does this mean?

Footballers commonly draw in large wages, and these wages are usually well taxed by HMRC. However, footballers also have another key revenue stream by way of their image rights. Players clubs will often include in their contracts with footballers a clause that allows the club to utilise the players likeness to sell merchandise and sponsored goods. For some A-list players such as Lionel Messi and Christian Ronaldo this sum will easily be in the millions, but Hacker Young partner Elliot Buss believes that HMRC has spotted enterprising lower-fame players attempting to avoid tax. This occurs if less well-known players inflate the amount they charge for their image rights. By receiving extensive income from image rights, the players avoid paying large amounts in tax, as income from image rights is taxed at the corporate tax rate of 19%, whilst their wages are taxed at 45%.

What's the big picture effect?

According to Mr. Young’s research, the number of footballers investigated by HMRC rose from 87 to 246 individuals in the 2019-2020. This is a dramatic rise when taking into context the fact that there are roughly only 3700 professional footballers in the UK.

Tax law is both extraordinarily complex and very interesting, so understanding and delving into a case study such as this one is great to have on hand for an interview or an application question. It is important to note that what these footballers are doing is not technically illegal, but they will need to show how the cash value of their image rights their club is paying them is commensurate with their real level of fame. This means that a championship player who has negotiated an image right fee in the hundreds of thousands or over must demonstrate a good reason for why the fee is so high. Perhaps they are the most popular footballer in the area and they therefore are the driving force behind merchandise sales. If the footballer is unable to prove this though, they could face a hefty tax bill after an investigation by HMRC.

Report written by Hari Majumdar

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