Image Rights Challenged by HM Revenue & Customs

More footballers could soon find image rights claims kicked into touch, according to Quantuma.

Brian Burke, a director of the business restructuring and recovery specialist, says HM Revenue & Customs are keen to tackle alleged abuse.

His comments come as an existing agreement between HMRC and clubs on the treatment of image rights expires in time for the summer transfer window, prompting an announcement from the Chancellor that HMRC will be issuing new guidelines over these payments.

“As we move towards the business end of the football season there may be more at stake than the plaudits and trophies,” commented Mr Burke.

As recently as last December image rights payments hit the headlines as HMRC’s head of enforcement and compliance, Jennie Grainger, revealed that 43 players, 12 football clubs and eight agents were under inquiry.

The current basis for claims goes back to a test case brought by HMRC before the Tax Special Commissioners in 2000 where it was ruled that earnings from image rights should be treated separately from money earned from playing for a club. The hearing involved payments made by Arsenal to David Platt and Dennis Bergkamp.

While HMRC contended that the arrangements were simply a “smokescreen” for paying players money offshore to avoid tax, the Commissioners decided that the payments were legitimate. Being allowed to exploit players’ images was deemed entirely different to them playing football, for which they were paid their salaries.

Since then, and as the influx of overseas players into the British game has increased, the use of image rights contracts has become commonplace.

Sums that are paid to companies holding these rights act to defer income tax for the player and are not subject to national insurance contributions for both player and their employer with overseas players further benefitting where payments are made offshore.

Mr Burke said: “HMRC has a dedicated team focussed on image rights, football, other sports and the entertainment industry. They investigate how genuine some of the claims are to separate image rights earnings. From football alone it has been reported they have brought in £158 million over the last two years.”

While there are many issues to be considered in establishing whether players may sometimes have looked to exploit the rules, the Treasury has said the new guidelines will set out the law as it currently stands.

Nonetheless, they will be keen to establish that only a limited group of sports personalities have image rights and that these deals only work in certain circumstances. It has been suggested that this could mean restricting arrangements to those with sponsor and advertising deals or by using other relevant measurements.

“It is clear they wish to reduce and control the use of these agreements, increase the amount of tax received, and place players, clubs and agents alike under closer scrutiny where image rights agreements are concerned” says Mr Burke.


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Notes to Editors

Quantuma LLP is a leading restructuring and insolvency practice delivering partner-led solutions to businesses and individuals facing financial distress with offices in London, Southampton, Marlow, Watford, Brighton and Bristol.