Premier League clubs settles tax dispute over image rights payments

The Daily Telegraph reported that HMRC had pursued Newcastle and that the club had settled the dispute at a lower amount than it had accounted for as a potential liability in last year's accounts.

Footballers who play in the UK, like other employees, are required to pay income tax on their earnings. Players who earn more than £150,000 a year pay 50% of their earnings above that amount in income tax.

A spokesman for HMRC told Out-Law.com that the body was pursuing some clubs that have paid players image rights to make sure it was receiving the correct tax owed for the payments.

“The majority of Premier League football clubs have now confirmed that they will pay tax arising from image rights payments, and we continue to negotiate with those that are yet to settle," an HMRC spokesman said.

"HMRC cannot discuss individual cases. HMRC’s concern with image rights applies to all football clubs because we apply the law even-handedly across the board. The issues are complex and vary from club to club with each case turning on its own facts," he said.

High-profile footballers can generate significant interest, often globally, in their image and that of their team. Players will often form agreements with their clubs that entitle them to a share of the revenues the clubs are able to exploit when associating their brand with that of the players', such as through the sale of merchandise.

In the UK the law of passing off – which gives individuals and organisations protective rights because of goodwill they have built around their reputation – can sometimes be used to prevent a celebrity's image being used overtly to promote a commercial product. The closest the UK courts have come to recognising a "celebrity right" was racing driver Eddie Irvine's success against talkSPORT in the High Court in March 2002, although the decision was consistent with existing principles. It simply recognised the commercial value of personal endorsements.

In Irvine's case, a promotional brochure was sent to fewer than 1,000 people advertising radio station Talk Radio, with a photo that had been doctored to show Irvine holding a radio bearing a Talk Radio logo, instead of a mobile phone, which he was holding in the original photo.

Some countries in the world do have legislative provisions that give individuals particular rights over their personality, image or publicity, but currently there is nowhere that offers celebrities the chance to actually register those rights. However, celebrities could be able to register rights related to their personality on Guernsey by this summer under draft legislative plans currently being consulted on on the island.

James Earl, a sports law expert at Pinsent Masons, the law firm behind Out-Law.com, previously said that celebrities often used "corporate vehicles" to assign image rights assets to, but warned that HMRC was cracking down on illegitimate "structures".

"The ability to establish registered image rights in Guernsey may encourage more people to assign those image rights to corporate vehicles and get trustee administrators based on the island to manage those assets," Earl said.

"However, UK resident personalities need to be incredibly careful to ensure that their arrangements are legitimate," said Earl. "HM Revenue & Customs is increasingly clamping down on those that are unfairly seeking to avoid higher tax in the UK. Image rights structures are at the forefront of what HMRC consider to be potential tax avoidance vehicles. It's therefore essential to obtain proper legal and tax advice from the outset - my experience is that HMRC will look for any weakness in a structure, however small," he said.