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HMRC changes to the tax treatment of payments made to football agents B ack g r o u nd
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s an industry, football generates a significant amount of tax for HM Revenue & Customs (HMRC), both directly through player salaries and indirectly through broadcast rights, tourism and hospitality and given the large sums involved, it is expected that it will continue to be a growing focus area for HMRC.
HMRC have been particularly focused on payments made to players for their image rights and payments made to agents. The number of footballers investigated by HMRC rose dramatically in the tax year 2019-20, increasing from 87 to 246 individuals. The number of investigations into the tax affairs of football agents also increased substantially, more than doubling from 23 in 2018-19 to 55 in 2019-20. It is also understood HMRC are currently investigating over 40 football clubs. HMRC’s overall additional tax collected from investigations into professional football in the year ending 31 March 2020, stood at £73.1m, more than double the previous £35.3m figure. HMRC has also instigated a number of criminal investigations into clubs, agents and players having conducted a number of dawn raids and made several arrests. Football players often use agents to assist with their contract negotiations with football clubs. Football clubs often use the services of an intermediary or agent in their negotiations with prospective and current players. Typically, those services will be either negotiations to sign a new football player or contract renegotiations with current football club players; they may also include negotiations for players to leave and join new clubs. The same agent may represent the player or prospective player in such negotiations, this is known as ‘dual representation’. The same agent might also represent the selling football club too. The football club will pay the relevant agent for the services that the agent provides to the club and it may also pay the agent on behalf of the player. Payments which a club makes on behalf of the player are taxable as employment income of the player. Usually, the club pays the agent’s fee in full, and a proportion is then treated as paid on behalf of the player and taxed on the player as a benefit-inkind. Until the release of HMRC’s new guidance (discussed further below), the widely accepted best practice in the industry which had been agreed with HMRC, was for a fee payable in cases of dual representation to be split equally (50:50) between services conducted for the player (which the player then paid tax on) and services provided to the club (on which the player was not subject to tax).
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H M R C ’ s n e w g u i danc e On 31 March 2021, HMRC released new guidance (HMRC’s new guidance) in relation to payments made to football agents, particularly where those agents have worked on behalf of both player and club in brokering a transfer or new contract (ie dual representation). HMRC state in the new guidance that their aim is to formalise the approach they have started to take in enquiries into the personal tax returns of an increasing number of players over the last few years. HMRC’s new guidance makes it clear that HMRC will seek to enquire into any tax returns where they do not consider that a player’s P11D includes an accurate figure for the agent’s fees that the club has paid on the player’s behalf. For the purposes of HMRC’s new guidance, the term payment includes gratuities and gifts and amounts paid regardless of the outcome of the negotiations.
