By Matt Hardy
Her Majesty’s Revenue and Customs believes that a “significant number” of Premier League football clubs and players are underpaying tax, new analysis from law firm Pinsent Masons will reveal today.
Pinsent Masons says that 64 per cent of Premier League footballers’ contracts now take a form which HMRC says is open to abuse.
This follows news that the 93 footballers targeted with investigation by the authority for a combined underpayment of £5.8m last year rose to 329 players, 91 agents and 31 clubs in football this year, according to UHY Hacker Young.
Premier League under microscope
“HMRC believes a significant number of Premier League football clubs and players are underpaying tax because of the way the deal between the footballer, football club and agent has been structured as against the work actually carried out,” Ian Robothom, legal director of Pinsent Masons said of the research.
“The football industry is currently under HMRC’s microscope for its tax practices, many of which the tax authority believes do not result in the correct amount of tax being paid.”
The research, released this morning, states that in the Football Association (FA) figure of 494 out of 769, the same agent acted upon both the Premier League player and the club in the 2021-22 season.
Such news has led to the tax authority expressing their concern over these contracts, which are more likely to lead to tax being underpaid.
“We would recommend that any football clubs and footballers who believe they may have been left open to an investigation by HMRC, or have already been contacted by HMRC for further information relating to specific player related transactions, to seek professional advice without delay,” Robotham added.
Sting of issues
It is the latest in a string of financial issues to hit football in Europe following the tanking of some cryptocurrencies, which has affected some sponsorship deals, clubs struggling to adhere to Financial Fair Play rules, and the ongoing European Super League legal battle at the European Court of Justice, where a recommendation is due in December.
The focus here, however, appears to be on transfer deals which claim a 50:50-plus split of agent’s fees between a player and club after a transaction is completed. If any agent is completing more work for the player when the club is also paying for the agent’s advice, then that could be deemed a taxable benefit in which the player should be playing.
Dragging on
HMRC says that the football industry is now paying in the region of £300m to agents each year. While the tax authority is mindful that it is complex, there is an unwillingness to accept that dual representation is automatically applied and that 50 per cent of the work is always in respect of the club.
The dispute looks set to drag on, with such a high percentage of deals said to be proxy to this potential underpayment of tax. HMRC is said to have claimed, according to the analysis, that a 50:50 split is not acceptable as a default and that there will need to be evidence in the future which satisfies HMRC that the split is correct in its application.
A HMRC spokesperson said: “We carefully scrutinise the individual arrangements between football clubs and their employees to make sure the right tax is being paid in the UK. The vast majority of UK taxpayers pay what is due and it’s our role to ensure there’s a level playing field, including within the football industry.”
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