Posted on 5 December 2017
Recent cases involving the tax affairs of top-flight football clubs, international professional footballers and issues surrounding taxation of their ‘image rights’, reinforce the importance of careful planning if investigations by HMRC are to be avoided.
“There has been a spate of high-profile blows by the HMRC to aggressive tax planning schemes recently; this week they raided the offices of Newcastle United and West Ham United as part of the wide-ranging investigation into suspected criminal tax fraud in professional football, which follows on the heels of the case involving Messi in Spain, who was recently given a 21-month tax fraud sentence, and the Rangers case in the UK.
“All these hold a great number of warning lessons for all taxpayers. “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.”
“The Chancellor announced in his Spring Budget that guidance will be issued for employers on the taxation treatment of ‘image rights’, and 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, and it can only be presumed that guidance or legislation will be issued to deal with any problem areas they identify.
Tax treatment of image rights
“A current and very particular concern of HMRC 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 channeled offshore, but with a potential loss of tax on that income to the UK Exchequer.
“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.
“I think the lesson for all taxpayers is that if HMRC believe that a particular sector of society is not playing the game, and paying their fair share of tax, they will investigate,” adds Simon.
“If there are any anomalies they will sort them. On occasions, though, the solutions can often have much wider consequences than anticipated – the old shotgun in place of the sniper’s rifle issue – and new legislation is sometimes rushed with negative consequences.
“HMRC continues to concentrate on those taxpayers who are already known to them,” he says, and this is my continuing frustration with all such initiatives and ‘reviews’; HMRC continues to focus on taxpayers they are already aware of, and 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 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.
“Consequently, it is perhaps no surprise that HMRC are now taking a more high profile look at the football ‘industry’ specifically, in an attempt to increase and secure the healthy income stream it generates for HMRC. The raids by HMRC on two football clubs with the mention of tax fraud and a number of arrests, is a very clear indication that HMRC are paying very close attention to the football industry and those involved with it.
“Firms still pushing aggressive tax planning schemes are a particular personal bugbear,” warns Simon, “but the new enabler’s legislation should help here once it starts to bite.”