After hearing evidence last year the PAC concluded that the rules on ‘image rights’ as they are applied in football and some other industries are being exploited. The PAC had recommended that the Government should take urgent action to address image rights taxation and include measures in the next Finance Bill to ensure this tax revenue is no longer lost.
Some football clubs make image rights payments to players under separate contractual arrangements to those that generate employment income. As part of the Spring Budget the Chancellor of the Exchequer announced that HMRC will publish guidelines for employers who make such payments for image rights to their employees, to help employers understand how these payments should be taxed.
Sponsorship and television rights mean that football is a lucrative sport for the top players and clubs. As a result there is always a great deal of scrutiny and interest in how much players are paid. The complexity of the current regulations means that there is lack of clarity and tax income may be at risk for HMRC.
In 2000 there was a tax case, though the player wasn’t named and remains anonymous, which confirmed that a sports person could have two income streams, one from playing the sport and a second from the use of ‘image rights’. The payment for image rights is effectively be a rental payment for an intangible asset which isn’t subject to the same taxes as a regular salary payment.
HMRC believes making new guidance on the matter publicly available will improve compliance by clarifying what an image right is and the tests to determine whether payments can be treated as image rights payments or must be subject to Pay As You Earn (PAYE) as earnings.
To make sure the rules on image rights are applied consistently in football, HMRC has initiated a specific football compliance project. Dedicated technical experts will visit all English Premier League, Championship and Scottish Premier League clubs over a three year period and review all compliance risks including payments to players.
The Bedrock team has experience of working with sports organisations and clubs take a look here and read about how we can help them with tax issues.
