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  • Are concerns about image rights and tax stalling football’s money-go-’round?

    9 August 2019

    Andy Wood


    For fans of English football’s leading clubs, the usual close season menu of mania about possible new signings and even the design of a team’s third choice strip has now passed.

    Surely, it’s time to be more concerned about tackles than tax, right? Well, yes and no.

    Even though the 20 teams making up the Premier League spent a combined £1.41 billion, the last week of the half-yearly ‘transfer window’ was dominated by a curious saga involving one of the European game’s most talented players.

    Juventus’ Argentinian striker Paolo Dybala was variously portrayed as a possible make-weight in the Italian champions’ attempts to prise Romelu Lukaku away from Manchester United and a big-money target for a Tottenham Hotspur side looking to build upon their appearance in June’s Champions’ League final.

    That neither move took place, though, was apparently not down to Dybala’s lack of faith in either team’s prospects. In fact, one media report suggested that a move to White Hart Lane was all but agreed but for an eleventh-hour problem with his image rights.


    It turned out not to be the only move scuppered by concerns about image rights. Across London, Arsenal stepped away from the possible acquisition of Gremio’s forward Everton Soares due to questions about the combined cost of the player’s registration and image rights.


    Supporters might well wonder why a commercial conundrum should halt efforts to strengthen squads but, since the launch of the Premier League – and, in particular, over the 25 years since it first allowed players to wear their names on their shirts – clubs and their stars have realised the financial benefits of promotion.


    Manchester United’s Paul Pogba, for instance, is reported to pocket a handsome £3 million a year by exploiting his image.


    Unsurprisingly, tax authorities across the globe have not allowed the football industry’s profits to grow without trying to ensure that they receive their cut.


    Ever since HMRC (or the plain Inland Revenue, as it used to be known) suffered a reverse in the landmark Sports Club ruling , it appears to have nurtured something of grudge against ‘the beautiful game’.


    That sense of grievance has possibly been fuelled over the intervening years by unrelenting pressure from MPs on the House of Commons’ Public Accounts Committee for HMRC to force football to cough up more of its billions.


    Even though there’s been no change in the law since the 2000 case involving Arsenal and its former heroes David Platt and Dennis Bergkamp, some Committee members have seemed vexed that the:


    “rules on ‘image rights’ as they are applied in football…are being exploited”


    The Revenue has certainly to use the vernacular familiar to many a half-time pundit got “stuck in”. Earlier this year, news reports revealed that it had secured “an additional £355 million in tax from football since 2015-16”.


    Almost two years after a series of raids on Premier League clubs such as West Ham and Newcastle United, HMRC issued strongly-worded letters to 1,900 registered agents notifying them of a continuing investigation into “serious allegations of fraud”.


    It would require, if you pardon the pun, something of a game-changing maneouvre by tax officials to do much more.


    Currently, there is what’s been described as a ‘gentleman’s agreement’ between clubs and the Revenue, under which clubs image rights payments to players can’t account for more than 15 per cent of their total commercial income. In addition, such payments cannot make up more than 20 per cent of all money which players receive from clubs.


    Commonly, players set up companies to handle the income from image rights. The Premier League’s foreign stars may even establish more than one firm to distinguish between money arising from such money made in the UK or overseas.


    The HMRC’s own manual makes clear that companies handling UK-generated image rights cash pay Corporation Tax on their profits, with payments subsequently made to players or other directors liable for tax “in the normal way”.


    It’s arguably a clearer situation than the regime in force in Spain where players such as Cristiano Ronaldo, Neymar and Lionel Messi as well as coach José Mourinho have been sanctioned for their attempts to manage image rights income.


    Nevertheless, as rapid change in other areas has shown, the UK tax system is far from static.


    As I suggested in an article on this ‘blog last October (), HMRC still wants to explore how it can maximise its ‘take’ from football.


    Rather like the ‘gegenpress’ – the continual pressing game which has been a feature of the coaching style adopted by the likes of Liverpool’s Jürgen Klopp – the Revenue won’t drop its objections to image rights.


    Its eyes, if you will, remain fixed not on the ball but the billions potentially at stake.


    Just as Rangers’ 2017 Supreme Court defeat over how it once remunerated players and coaching staff illustrated, HMRC can play a very long game.


    Deciding whether to sign players whose affairs involve image rights concerns becomes, therefore, more than an immediate financial issue. It could become a legal headache long after into the future.


    If you have any queries about image rights or tax matters in general then please get in touch.