A Focus On Tax During Transfer Windows
SORTING YOUR OFF-FIELD AFFAIRS IS VITAL IF YOU WANT TO MINIMISE DISTRACTION ON THE PITCH.
At Irwin Mitchell, we believe having good advisors around you is essential to maximise any opportunities that come your way, particularly those that appear during transfer windows, while maintaining that all-important tax compliance with HMRC rules.
Image rights and the payment of agent’s fees are two key areas that draw attention from HMRC when signing contracts. Usually capped at a maximum of 20% of a player’s annual taxable salary, image rights allow clubs to market the player using their names, likeness, and other characteristics. For a player, this can be an attractive tax saving tool when paid to the company – rather than part of their salary.
But if the correct legal documents aren’t in place, HMRC will reclaim overdue tax and often impose eye-watering penalties. As well as being financially damaging, this can also ruin players public image, particularly if the media gets hold of the story. Players also need to be aware of the potential tax increases they can face when paying agent’s fees after transferring clubs.
When negotiating, agents often act for the player and club through a dual rep agreement. As a result, their fee is usually split equally between the player and club, with the club paying the player’s proportion.
This is taxed as a benefit in kind on the player. HMRC believe these dual rep contracts can cause conflicts, as agents can’t represent both the player and club’s best interests in negotiations. The agent has to produce evidence that they were acting for both, otherwise the fee will be geared more towards the player. In tax terms, this means that the player will have to pay the majority of the agent’s fee and face a higher benefit in kind.
When moving to a new club, players will often be housed in club-provided accommodation until they settle, and buy or rent their own home. The value of this accommodation is taxable, and this should be made clear when contracts are signed to maximise tax efficiencies.
Overseas players moving to the UK will be classed as non-dom for UK tax purposes. Tax rules here are complex, and taking good advice, preferably before arriving in the UK, is essential. Similarly, UK players moving abroad should understand the relevant tax rules to make sure they don’t inadvertently remain a UK resident by spending too many days here during the year.
Irwin Mitchell acts for a number of high-profile national and international sports and media personalities. The flexible approach of our market-leading experts means we can deal with any issue you might face, whether in the UK or overseas.
Our legal and financial experts offer a truly personalised service. We build lifelong relationships with you, your family, and your agent so we can anticipate your wants and needs, and raise opportunities or head off issues before you know about them. We’ll work with you to plan for the moments that matter, both on and off the pitch.