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Football clubs warned over tax risk from dual-role agents

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Football clubs in the UK have been warned that they may be underpaying tax owed in respect of player contracts in cases where agents have represented both them and the player in the contract negotiations.

An expert at Pinsent Masons has urged clubs and players who may be affected to seek professional advice without delay.

Ian Robotham was commenting after Pinsent Masons analysed Football Association data and found that the same agent represented both the football player and the club in 494 of 769 contract negotiations in the Premier League in England last season. HMRC has expressed concerns that in these types of contracts there is a greater chance that tax will have been underpaid by the football clubs and players concerned.

Robotham said: “HMRC believes a significant number of Premier League football clubs and players are underpaying tax because of the way the deal between the footballer, football club and agent has been structured as against the work actually carried out.”

HMRC is particularly focused on deals which claim a 50:50+ split of the agent’s fees between the player and the club as HMRC believes that agents will inevitably work primarily on behalf of the player. If the agent is doing more of the work for the player than the club and the club is paying for the player’s share of the agent’s advice, that is a ‘taxable benefit’ that the player should be paying tax on based on the proportion of work carried out on the player’s behalf – but often doesn’t.

HMRC have now made clear that it will not accept a 50:50 default split, and that football clubs will have to produce evidence to prove that to the tax authority’s satisfaction that the split adopted in transactions setting out the provision of services to the football club and to the player have been correctly apportioned.

“Given that those contracts which are of potential concern make up such a high percentage of all contracts related to player transactions, this can be expected to be a continued area of focus for the tax authority,” Robotham said.

“We would recommend that any football clubs and footballers who believe they may have been left open to an investigation by HMRC, or have already been contacted by HMRC for further information relating to specific player related transactions, to seek professional advice without delay,” he said.

Robotham said HMRC’s scrutiny of the way tax owed on agent services is apportioned in football forms part of its wider focus on tax practices in the sport.

According to data previously gathered by accountancy firm UHY Hacker Young, HMRC was seeking to recover £55.6 million from football clubs, players and agents during the 2020/21 financial year. At that time, it found that nine clubs, 93 players and 23 agents were under investigation. It has since been reported that the number of tax investigations in UK football rose during 2021/22, with 329 players, 31 football clubs and 91 agents targeted.

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