Simon Littlejohns, Head of Tax at Birmingham accountants and business advisers Friend Partnership, follows up on his previous blog post, ‘Aggressive tax planning – it’s all getting rather Messi’ and shares his thoughts on footballers and tax.

Simon Littlejohns, Head of Tax at Friend Partnership Ltd

In my blog ‘Aggressive tax planning – it’s all getting rather Messi’ I commented on the tax case which went against Messi. I urged all taxpayers to be careful when considering any tax planning which HMRC might view as unacceptable.

As has been seen with the Messi case in Spain and the Rangers case in the UK there is great interest shown by tax professionals and football supporters alike in the tax affairs of footballers and their clubs.

It is clear from a number of tax cases in the UK that the tax affairs of footballers are complex especially when players are coming to play in the UK from all parts of the world. The amounts of money involved are so great that this has encouraged a number of them to indulge in planning which has been found to be unacceptable to the revenue authorities both here and abroad.

HMRC review

In light of the above it is perhaps no surprise that HMRC are now taking a more high profile look at the football ‘industry’ in an attempt to increase and secure the healthy income stream it generates for HMRC.

To this end Mr Hammond announced in his Spring Budget that guidance will be issued for employers on the taxation treatment of ‘image rights’. In addition HMRC have also initiated a review of compliance within the football industry. The aim of the latter review is to gather information which will enable HMRC to identify the risks to the Exchequer. One can only presume that guidance/legislation will be issued to deal with any problem areas they identify.

HMRC’s particular concern at present is the tax treatment of so called image rights the exploitation of which can yield tax planning opportunities. In its simplest form a footballer’s playing income is taxed in one way whilst the exploitation of his/her image rights is taxed completely differently. This can be particularly beneficial for foreign players playing in this country where image rights income can be channelled offshore with a potential loss of tax on that income to the UK Exchequer. One obvious issue is the distinction between the two elements and the value attaching to each.

Whilst the exploitation of image rights is an obvious issue for HMRC to address, their review may unearth other practices which HMRC may feel need to be eliminated or legislated for.

A lesson for taxpayers

I think the lesson for all taxpayers is that if HMRC believe that a particular sector of society is not playing the game, no pun intended, and paying their fair share of tax they will investigate. If there are any anomalies they will sort them. On occasions though the solutions can often have much wider consequences than was anticipated – the old shotgun in place of the sniper’s rifle issue. Also, new legislation is sometimes rushed with negative consequences.

My continuing frustration with all such initiatives and ‘reviews’ is that HMRC are concentrating on those taxpayers who are already known to them. HMRC are seemingly making less of an effort at ensuring that those who believe that tax is discretionary are paying their way. I may be being unfair here and HMRC are working hard trying to deal with this group of society as well as extracting the right amount of tax from those who are compliant. However, there is plenty more to do as the man down the pub who ‘does not pay any tax’ is still seemingly earning money to pay for his pint.

Tax planning

My other bugbear – those firms still pushing aggressive tax planning schemes – is likely to be a reducing irritation as the new enablers legislation starts to bite.

The message for all taxpayers is quite clear and positive – tax planning is alive and kicking. However, more care and attention is needed than may have been the case in the past. If tax planning is carried out correctly, and at the right time, tax savings and deferrals can still be secured.

Taxpayers and their advisers must though pay very close attention to the changing legislation because as we have seen in the past 6 months the Government is more than happy to introduce new legislation with retrospective effect.

For help or advice on effective tax planning or any other tax matter  for you or your business, contact Simon Littlejohns at Friend Partnership Limited on 0121 633 2000 or click here to send an email.