Accountancy group UHY Hacker Young has said that HM Revenue and Customs (HMRC) investigators are targeting football clubs for £45m ($62m, €53m) in tax they have underpaid within the 2020/21 financial year.
According to data provided by HMRC to UHY Hacker Young, the UK taxman has uncovered £5.8m in tax owed by players and £4.8m owed by agents in the last year. Overall, HMRC is looking to recover £55.6m from the football industry.
Over the last 12 months, HMRC has opened compliance investigations into nine football clubs, 93 football players and 23 agents.
Elliott Buss, partner at UHY Hacker Young, said: “HMRC sees the football industry as an area where there is a great deal of unpaid tax owed by extremely high earners.
“Despite HMRC’s capabilities being stretched over the past year, they still identified a significant sum in unpaid tax from the football industry totalling £55.6m.
“HMRC increasingly targeting agent’s fees is a clear signal that they think this is an area where too much tax is going under paid.”
UHY Hacker Young said that HMRC is increasingly targeting agents’ fees. These fees are money that agents are paid by the football club and player to manage a transfer – which can be in the millions.
In April 2021, HMRC published guidance on agents’ fees which suggested the tax authority was gearing up for a major campaign against agents.
The accountancy firm said: “Agents’ fees are often split 50/50 between the club and player, however, the club will normally pay the player’s half. The player must pay tax on their half of the agents’ fees, as it is treated as a benefit in kind.
“In most cases, the agent does far more work for the player, but a 50/50 split means the player’s tax bill is less. HMRC has previously voiced concerns that this 50/50 split was being exploited. It has now demanded that agents’ work for the club is properly accounted for, or the fee is split in a more representative manner.
“HMRC is asking clubs and agents for evidence of their relationship in the transfer process. In particular, they are requesting records to be kept, including letters between the agent and club, texts and emails, and WhatsApp messages. These records will be used to determine the relationship between the agent and club, and whether the split is justified.”
The other area where HMRC is looking to uncover unpaid taxes is in ‘image rights’.
It is common for top sporting stars to set up a company for the sole purpose of selling their image, for example sponsorship deals.
These companies will only be taxed at the 19% corporation tax rate, rather than the 45% income tax rate paid by high earners.
UHY Hacker Young’s Buss added: “A longstanding focus of HMRC’s has been footballers’ use of image rights. It is understandable that the likes of Marcus Rashford or Harry Kane would utilise a company to sell their image – as their ‘image’ will be in high demand amongst advertisers.
“However, players who have near to no brand recognition are seen by HMRC as using image rights as a way to avoid paying tax – and that is why HMRC is actively investigating the use of image rights in football.”
A HMRC spokesperson told International Adviser: “We’re clear that everyone must pay what they owe under the law – regardless of their wealth, status or job. The department’s work in the football industry is a demonstration of this ongoing effort to help support the football industry and their members.
“We look forward to continued co-operation with clubs and players throughout 2021, particularly during these challenging times.
“We continue to actively support the football sector to understand the impacts of covid, helping them to get their tax right in uncertain financial circumstances and providing breathing space where required and in line with the support we offer to all of our customers.”