HMRC invokes legal powers to examine football agents' fees

31 October 2011

HM Revenue & Customs has forced the Football Association to reveal full details of payments made by FA clubs to agents during last season.

HMRC suspects that dubious methods are widely used in professional football to minimise players' and managers' income tax. One of its current targets is the third party payment - money paid by a football club to a player's agent when it buys that player. HMRC (and the FA) considers it is the footballer that should be paying the agent, and so it counts the club's payment to the agent as the player's taxable income.

These payments to agents are typically made via offshore entities without ever entering the UK, and many of the players concerned are not British anyway. So HMRC has had difficulty obtaining hard evidence of them.

However. the Football Association, which operates a clearing house for player transfer fees, has now revealed it is the subject of an HMRC disclosure notice ordering it to reveal all such payments for the 2010-2011 playing season. The deadline for compliance is today, 31 October. All such payments - probably adding up to GBP60-80 million - will then be audited and the footballers who arranged them will be charged extra income tax.

According to the Daily Telegraph, which claims to have seen the FA-HMRC correspondence, HMRC has also offered clubs an amnesty under which they can escape a formal investigation by paying half the estimated unpaid tax.

• The large amount of money circulating in professional football, and the lax standards of accounting practised by many clubs, has given rise to several tax disputes. One still continuing is over the use of leading players' image rights, where income tax is minimised by taking a director's loan from an image rights company. Some leading clubs are also paying their footballers through employer-financed retirement benefit schemes or interest-free loans instead of wages, thus avoiding national insurance contributions and the 50 per cent top rate of income tax. And last year Scotland's top professional football club, Glasgow Rangers, came under scrutiny for paying a total of GBP46 million to its players via offshore trusts.

It has also been noticed that 14 of the 20 professional football clubs playing in England's Premier League are domiciled in offshore financial centres.

Sources

Telegraph

AP via Guardian


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