Football Player Specific Tax Information

by Stuart O’Brien [ex HMRC Senior Inspector] – Two Palms Tax

May 2025

Quick Guide

So in summary, there are three key takeaways to discuss: –

• The failure of the mass marketed avoidance schemes such as Ingenious and how our bespoke and compliant tax mitigation strategy can save players a lots of money in a safe manner;
• Image Rights remain an issue and we have a solution; and
• Agents Fees are the biggest issue with HMRC especially when representing both Team and Players and again we can provide robust support.

Background

HMRC investigations into football players, clubs and agents’ affairs are nothing new, but the substantial increase in the number launched this year will inevitably be a serious concern for anyone under investigation.

A key driver of the increase in investigations is HMRC’s assessment that there may be a significant amount of unpaid tax in football. We understand that an officer from HMRC’s fraud investigation team has been appointed to act as liaison to the FA’s Football Compliance Project. If correct, this would be a key indicator of how seriously HMRC is treating this issue.

The principal areas of focus for HMRC are likely to be player image rights and agents’ fees. 

Supporting Information

So I’ve had a trawl around and all the chatter is pretty much on all fours with what we have spoken about already (image rights, agent’s fees, etc) but I’ve reproduced some interesting articles below for your reference:

This from 2020

HMRC is closing in on tax avoidance schemes in the UK’s highly lucrative football industry. In August 2019, HMRC won a major victory against a £450m tax avoidance scheme which had been invested in by several footballers including David Beckham and Gary Lineker.

The scheme involved financing over 60 films and was operated by Ingenious Media. Despite battling HMRC in what became the longest-ever tax appeal tribunal- Ingenious Games LLP and Others and Revenue and Customs: [2019] UKUT 226 (TCC), Ingenious Media ultimately failed to overturn the adverse ruling.

Of course, when the footballers in question entered into these schemes, many other high net worth individuals would have considered similar investment strategies. At the time, such schemes were commonplace and were entered into on the advice of independent financial advisers (IFAs), accountants and Private banks.

In some cases, advisers may have failed to make their clients adequately aware of the risks involved. It is an open question as to whether financial advisers and accountants should have foreseen that HMRC would later enforce against such schemes, saddling their investor clients with hefty tax bills.

The potential liability of advisers is already being tested in the courts. Former Liverpool player, Steven Gerrard, was one of a number of investors who launched a £100m claim against the private banking division of HSBC in relation to a film scheme operated by Ingenious Media. Andy Cole sued Coutts bank after reportedly losing £8m in a similar scheme which had been marketed by the bank.

In November 2019, 14 former footballers launched legal action against St James’s Place, alleging that they had received poor advice concerning tax avoidance regarding film and overseas property investment schemes. The £15m lawsuit is being defended by St James’s Place, which has described the claim as being ‘without merit’.

Film schemes

Film partnership schemes were introduced by then Chancellor Gordon Brown in 1997. Their aim was to encourage British film production and to generate investment in the UK film industry.

Investment in film schemes peaked between 2004 and 2007 when billions of pounds poured into them. However, HMRC has in recent years clamped down on these once commonplace schemes with retrospective rulings which treat them as devices to avoid tax.

Many footballers suddenly find themselves with significant amounts of money at an early age. With an average retirement age of around 35, most players will have been acutely conscious of the need to invest for the future. Not all players can go on to have lucrative media or coaching careers once their playing days are over. Many must spend a lifetime living off their earnings as a player.

The number of footballers involved in such schemes is arguably suggestive of something of a herd mentality. Players’ agents and financial advisers would have been happy to facilitate such investments, not least in light of the commissions involved. Yet the investors will end up paying significant sums in tax and penalties, unless they can show actionable failings by their advisers. In reality, few players will have understood the mechanics of such schemes, or the potential tax implications.

Image rights

HMRC’s focus on the football industry came in the wake of a damning 2017 Public Accounts Committee report in which MPs assessed the taxation of high net worth individuals and tax avoidance in the football industry.

The report particularly highlighted the practice of the misuse of image rights. It said that despite numerous on-going investigations, MPs were ‘appalled to hear that not all football clubs are providing HMRC with data under a voluntary agreement struck with the English Premier League’.

In 2019, HMRC wrote to 1,900 football agents warning them of potential tax investigations following ‘serious allegations of fraud’. Investigations have opened into football transfer activity, with a focus on the agent fees.

As HMRC expands its investigations and big-name footballers take their advisers to court, we can expect to hear much more about tax avoidance in the football world in the near future.

This from July 2022

Recent media reports suggest that a record 329 footballers, including Premier League players, are now under investigation by HMRC for suspected tax avoidance. This is more than triple the number of investigations started in the previous year. HMRC is also investigating 31 clubs and 91 agents.

Image rights

Image rights include players’ legal rights over their image, name, likeness, voice, signature or other personal characteristics. Players can set up companies to sell or license their image rights to their clubs (or others). These companies then pay tax on the image rights at a lower rate (19%) than the players themselves would (45%). Rates may be even lower when offshore companies are used. This structure also offers clubs opportunities to reduce their tax bills.

Image rights can be extremely valuable to high-profile players. However, HMRC may investigate if clubs have made image rights payments to players despite having no real interest in exploiting their image rights commercially, or where clubs have acquired players’ image rights for amounts significantly in excess of their actual value. HMRC may, on these grounds, challenge image rights payments as disguised salary payments by clubs to players. 

First-tier Tax Tribunal determines that payments under a Premier League footballer’s image rights agreement taxable as earnings

Hull City AFC (Tigers) Ltd v HMRC

In a Decision, released on 22/03/19, the First-tier Tax Tribunal (Judge Jonathan Cannan) ruled that payments made by a (then Premier League) football club to an offshore service company, purportedly in respect of a player’s image rights, constituted the player’s earnings.

The judgment provides the first comprehensive judicial guidance in almost 20 years as to how the Tax Tribunals should approach the question of whether image rights payments constitute “earnings” and   the circumstances in which a Tribunal is likely to find that such payments were in fact disguised remuneration.

The Facts

Having recently been promoted to the Premier League for the first time in its history, Hull City signed former Brazilian international, Geovanni, in July 2008 on a free transfer, following his release by his previous club Manchester City at the end of the 2007/08 season.  Four months after the signing, Hull entered into a separate “Image Rights Agreement” in respect of Geovanni’s overseas image rights with Joniere Ltd, a service company registered in the BVI.  In the period December 2008 to July 2010, Hull paid Joniere a total of £440,800, purportedly under the terms of two such “image rights” agreements.  HMRC contended that these payments represented earnings of Geovanni and that Hull was accordingly liable to account for tax and national insurance in respect of them.

The Judgment

The FTT held that it was necessary to look at the substance of the sums paid, not their form, in order to determine whether, realistically viewed, the payments were emoluments as a reward for Geovanni’s past, present or future services as a footballer, or whether they were in fact consideration for the licensing of his overseas image rights.  The Tribunal held that it was not necessary to find that the agreements were a sham or pretence in order for HMRC’s case to succeed, nor was it necessary for it to deploy the Autoclenz approach to disregard written terms which did not genuinely reflect the parties’ true intentions.

In concluding that the payments, viewed realistically, were earnings, the Tribunal made the following notable findings of fact:

• Whilst it is not just players in the “elite group of recognisable sportspeople” who have image rights with an overseas commercial value, what makes a player sufficiently recognisable for their image rights to be valuable will include:  their talent; the league in which they play; the team for which they play and possibly other personal attributes (such as their nationality).
• Clubs who intend to acquire and exploit players’ image rights would be well advised to keep negotiation of that agreement separate to the salary negotiation and to ensure that the valuation of image rights is documented by reference to a business case for the initial acquisition, together with analysis monitoring the effectiveness of the exploitation of the rights over the period of the agreement.
• Hull did not, at the time, have the experience, resources or ability to exploit the commercial opportunities associated with players’ overseas image rights.  The club’s two principal sponsors were based in Hull and yet the domestic market was, notably, not covered by the image rights agreements. 
• No due diligence had been carried out by Hull in relation to Joniere and there was no evidence that the Club had ever taken steps to ascertain whether or not Joniere actually owned Geovanni’s image rights.  In the circumstances, nobody at the club could reasonably have believed at the time that Geovanni’s overseas image rights had any commercial value.
• Geovanni’s basic wage at Hull under his playing contract was £748,800 and the annual “image rights” payment of £187,200 was exactly 25% of that sum. However, there was no reliable evidence at all as to how the parties had arrived at quantum of the annual image rights payment and no valuation advice had been sought or received by Hull at the time.

Viewing the facts realistically, the Tribunal held that the reason that Hull took no steps to exploit Geovanni’s overseas image rights was because it never had any clear intention, plan or real interest in commercially exploiting those rights.

The payments made in purported connection with overseas image rights were in fact made in order to encourage Geovanni initially to enter into – and then to extend – his playing contract with Hull.  In short, they were a reward for his services as a footballer and formed part of his earnings.

This decision is the first time the FTT has considered the taxation of payments purportedly made in connection with a footballer’s image rights since 2000 (in Sports Club Plc v HM Inspector of Taxes [2000] STC (SCD) 443).  It is likely to be of widespread interest and application to clubs, players, agents and advisors in the football industry, and in connection with the negotiation of image rights contracts in sport and entertainment more generally.   

Agents’ fees

Agents’ fees are fees paid to agents for a variety of reasons, such as managing football transfers and negotiating player contracts.

From a tax perspective, it is important to identify the particular role an agent is undertaking to determine the extent to which services have been provided to both the player and the club. For example, where an agent is acting for a club and a player simultaneously under a ‘dual-representation’ agreement (i.e. when negotiating a contract) and the agent’s fees are paid by the club, there should be an accurate apportionment of fees between each party. Fees for work carried out on behalf of the player should be disclosed by the club as a taxable ‘benefit in kind’ on a form P11d and the taxable benefit should also be included in the player’s relevant Income Tax Return.

Data released by the FA suggests that the same agent acted for both a player and a club in over 60% of Premier League contract negotiations last season, and whereas clubs and players might have previously applied a ‘default’ 50:50 split to determine the taxable benefit for a player, HMRC has warned that this is no longer appropriate. HMRC’s view is that the actual benefit to a player is likely to be significantly more than 50%. 

Protective measures

The number and scope of HMRC investigations into players, clubs and agents will likely rise in future seasons, so it is important to consider what protective steps can be taken.

When negotiating future deals, players, clubs and agents should take appropriate steps to determine the actual commercial value of image rights and ensure that relevant league rules are adhered to. Players and agents should also enquire as to whether clubs have clearly defined intentions or plans to exploit players’ image rights commercially.

Contractual documents should be clear about tax liabilities on agents’ fees. Clubs should maintain clear records regarding services rendered by agents, such that any information required to be provided for P11d purposes is supportable. Players may also wish to seek indemnities from their clubs to protect them against future tax liabilities that could result from any subsequent HMRC investigations.

Although image rights and agents’ fees are of particular interest to HMRC, clubs and players may have other issues under investigation. This may cause serious reputational issues, as seen recently in Spain. For those already under investigation, the first step should be to instruct appropriate legal counsel to advise on the strategy and approach in response to HMRC’s investigation. 

This from 2024

On 13 May 2024, HMRC published new guidelines for professional football clubs and agents with regard to their UK tax obligations on agents’ fees. These are to complement the new FA Football Agent Regulations which came into effect on 1 January 2024.

Agents play a significant role in the professional football landscape; their role is crucial in helping a player (and a club) move to a new club or negotiate a better contract with an existing club. Although an agent’s role is primarily to act in the best interest of their player, there are instances when the agent can represent both the player and the club, for example in contract negotiations.

The club will typically pay a fee to the agent for such ‘dual representation’. As some of the agent’s services relate to their acting on behalf of the club, it is necessary to apportion the fee between player services and club services. This is a critical exercise as it will determine much of the tax treatment of the payment: for example, the proportion of VAT the club can recover on the club services, and the taxable benefit enjoyed by the player in respect of the player services (and the accompanying employer national insurance contributions).

HMRC has long accepted the principle of dual representation where both the player and the club accept this. Their recent guidance issued in May 2024, reiterates their views on some key points, however:

• The presumption is that given an agent’s relationship with a player as opposed to a club, the majority of the services under a dual representation arrangement will be supplied to the player; and
• A 50:50 split of fees is not an appropriate default position, and although a club gets a residual benefit from the agent’s services, such benefit does not justify this split); any split of agent fees paid by the club should be based on evidence and commercial justification and reflect the terms of any agent agreement with the player.

The new guidance emphasises the obligation on clubs, players and agents to keep detailed records to evidence the proposed justification of agent payment allocations.  A non-exhaustive list of relevant documents includes the player representation agreement, written communications relating to negotiation, permissions to speak to an agent or a player and the club’s request for an agreement to being dually represented. Invoices should be sent to both the player and the club and all parties should be clear and consistent as to the allocation of the agent’s services and fees.

HMRC also comment on the need for clubs to have clarity as to who they are paying – a payment to an agent who then distributes sums to other ‘shadow’ agents is likely to increase the risk of an HMRC compliance check. Clubs whose players are out on loan have the ultimate responsibility to ensure the correct tax and reporting requirements are followed.  In particular, where family members act as agents (a notable example being Charlie Kane, brother of England captain Harry Kane) or intermediaries, care should be taken to ascertain if the payment to the agent is genuinely in respect of dual representation or is really an inducement for the player’s benefit (in which case it would be taxable employment income of the player).

The new guidelines are of limited assistance to clubs, agents and players as they are not specific as to what exact services would be expected to be provided by an agent to a club, as opposed to a player. In particular, HMRC’s assertion that the majority of services under a dual representation arrangement will be regarded as applicable to the player may not always be accurate. Some agents have a significant influence in the transfer market and will work with particular clubs often: Jorge Mendes for example   has traditionally had a strong relationship with the owners of Wolverhampton Wanderers FC and around 20 of his player clients (and at least one manager), the majority of whom are Portuguese, have signed for Wolves since around 2016.

Similarly, given how important a particular signing can be (for example a striker whose goals can stave off the financial oblivion of relegation, or a foreign player whose signing can open up lucrative commercial avenues in another country, such as the Far East), the role of the agent, and the importance to the club of ‘winning them over’, is critical. Therefore, the contention that agent fees paid in respect of player transfers should automatically be regarded as primarily applicable to an agent’s work for players, as opposed to the buying club, is not necessarily accurate.

The new guidance notes that often a player’s employment contract may be signed on the same day as a player representation agreement. Where this happens, HMRC consider this as an indicator that dual representation or any values attributed to player and club services may not reflect the commercial reality. Such a position does not take account of the rapidly moving transfer landscape where player transfers can happen quickly and be documented after oral negotiation. This is more acute on or around external deadline dates such as the Summer and Winter transfer windows and 30 June, when Premier League clubs must submit accounts to comply with Profit and Sustainability Rules.

Nevertheless, clubs need to continue to monitor their activity in this area and review agent contracts and dual representation arrangements so that they can minimise the risk of a compliance check. The new guidelines are a reminder of the on-going compliance obligation and should be considered in tandem with other general tax guidance regarding use of intermediaries and employment and other relevant taxes.

Stu’s Quick Guide

So in summary, there are three key takeaways to discuss: –

• The failure of the mass marketed avoidance schemes such as Ingenious and how our bespoke and compliant tax mitigation strategy can save players a lots of money in a safe manner;
• Image Rights remain an issue and we have a solution; and
• Agents Fees are the biggest issue with HMRC and again we can provide robust support.

If you add in your car lease solution for HNWI’s, this could be huge!

For further information on Stu O’Brien, taxation problems with HMRC, tax mitigation schemes, footballers and HMRC, please contact Stu at tax@twopalmsglobal.com or contact your introducing agent.

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