HM Revenue and Customs (HMRC) recently announced that premiership footballers are the next in line to be investigated by the taxman for benefit-in-kind Tax Avoidance Schemes.
Committed to ‘cracking down’ on tax avoidance and tax evasion, the Revenue are to review payments exchanged between football players, their agents and some of the UK’s biggest premiership football clubs during the transfer season.
A spokesman for HMRC said how it is their ‘duty to look at that’.
But Gordon Taylor, the chief executive of the PFA has spoken out against HMRC’s tax avoidance strategy, saying:
“Tax avoidance is what no end of accountants are working full-time on to try and make sure that companies and individuals are not paying too much tax.
“They can come to the end of a career and they have not had the best tax advice and that’s it. Then they have got to look after themselves for a long, long time.”
Taylor’s defence against tax avoidance schemes available to premiership footballers is down to the short term career length of the average footballer and the large sum they pay out of their salaries for PAYE tax.
“So I would advise any individual in any profession to get the best possible financial advice from accountants and make sure the money is paid in the most effective and tax efficient way. There is nothing wrong in that,” he added.
Although tax avoidance is the legal structuring of your tax affairs, if HMRC discover the use of a tax avoidance scheme, they will do their best to shut the tax avoidance loop-hole down and reclaim any tax that has been lost to the Revenue.
In response to recent allegations from HMRC that agents ‘fraudulently’ pose as representing the football club – instead of the player – on football transfer paperwork, in order to avoid paying tax, Taylor said:
“It can get very cloudy when you’ve got an agent who has worked for a player in the past, specifically, and then next minute he is working for a club and it will raise questions, and may raise eyebrows, but that has been accounted for by the player, the agent and the club.
“That’s what the FA rules require.”
As well as investigating tax avoidance loopholes during transfer payments in the premiership football league, HMRC have also shown an interest in tax paid on players’ image rights.
It is believed that the UKs most commercially popular football players – e.g. Wayne Rooney, Ashley Cole, Steven Gerrard -may only be paying 28% corporation tax on player image right deals.
Football clubs using their best players’ names for commercial reasons may soon find that the taxman is waiting to take a penalty at their stadium.
Also defending the subject of image rights, chief executive of the PFA, George Taylor, said:
“With image rights, it’s a separate company. Top rate for the highest earning footballers would be 50% plus his national insurance. When that player’s image rights are in a company, then it’s all relative to company rates.
“I think the Revenue need to be careful in what they are saying if it’s legitimate and any individual is looking to protect his income as best as possible.
“It’s like anybody out there in any profession. If you want a mortgage, it’s your duty, to yourself and your family, to get the best possible mortgage.”
Doing his duty to protect premiership football clubs and their players, Taylor further argued that football clubs are not overloaded with money, as many would assume, stating that many players ‘are surviving on a wing and a prayer’.
If HMRC’s crackdown on tax avoidance loopholes and image rights in premiership football proves successful. The Revenue will in no doubt follow suit to the lower football leagues, rugby, cricket and other professional sports.
Kevin Kinsella, of KinsellaTax, said:
“I worry that with the entire clamour about tax evasion and tax avoidance that people including sportsmen, who have a relatively short career and have used perfectly honest schemes to lower their tax liabilities, are classed in the same way as people who practice tax evasion.
“The media of course are always seeking stories and possibly add fuel to public distaste of professional footballer’s wages. It reminds me a bit of the ladies who used to sit in the front row knitting and cheer at the public executions by guillotine during the French Revolution.”
Tax avoidance is a complex issue and if HMRC suspect you of avoiding tax the first thing you should do is seek professional advice.
KinsellaTax staff consists of ex-HM Inspector of Taxes and ex-HM Custom and Excise Officers, fully experienced in HMRC investigations.