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HMRC continues ramping up its investigations into professional football players

Posted on 2 September 2022

Following a recent Freedom of Information request, it has been reported that HMRC significantly increased the number of investigations they opened into professional football players over the past year. That latest number is now at 270, which equals one in every twelve professional football players registered at clubs in the top four divisions in England and Scotland. These increasing numbers of investigations continue a trend of recent years, confirming this as a growing area of interest for HMRC.

A key focus of these investigations is the taxation of benefits in kind, especially agents' fees which are split between the club and the player. It had become standard practice in the industry to notionally split agents' fees 50:50, with the club normally paying the player's share on their behalf. This is treated as a benefit in kind for tax purposes and, being employment income of the player, they must pay income tax on their share of the agents' fees.

HMRC then updated its internal guidance to emphasise that the split between the club's and the player's shares of the agents' fees must reflect the extent to which the agent represented the club and the player. HMRC is expecting that clubs will retain relevant documentation to support their reasoning and demonstrate with reference to evidence and commercial justification how a specific split was arrived at. HMRC expressly reject a "default split", such as the 50:50 split that had become the industry norm.

As with many other areas of tax law, it will not usually be sufficient to simply point to a contract setting the split at a specific, agreed proportion. There is a need to demonstrate that what has been agreed on paper also reflects the substance and reality of the situation. This is turn means that email trails, meeting and telephone notes must be retained, which can represent a not insignificant additional burden for clubs. We recommend that football clubs (and players) consult an expert lawyer to ensure robust processes are in place and that appropriate records are kept.

Ultimately, this is just one example of an area where industry practice (even where historically accepted, or at least tolerated, by HMRC) has later come under increasing scrutiny. This can be especially frustrating for individual players who simply relied on what they were told by others was the industry norm. In any case, once HMRC have started investigating or if any football club or player believe they might be exposed to an HMRC investigation, it will be prudent to seek professional advice from a tax disputes and investigations specialist early on to avoid any pitfalls and unnecessary escalation.

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