Budget crackdown on football image rights ‘incredible’, say tax experts
Chancellor Rachel Reeves has been accused of disproportionately targeting football for tax rises after the Budget laid out plans for a raid on image rights earnings.
Top footballers benefit from setting up image rights companies which are taxed at a lower rate than their salaries, but the government says it will legislate “to ensure that all image rights payments related to an employment are treated as taxable employment income” from 2027.
It is just the latest move from successive governments to wring more money out of the nation’s favourite sport and the relatively small number of players who drive interest in it.
“While the government didn’t mention football in the Budget, with it signalling a crackdown on image rights we probably know where the crosshairs are pointed,” said Pete Hackleton, a sports and entertainment tax expert at accountants Saffery.
He added: “The level of focus from tax administrations on a group of essentially 500 well paid young men is incredible, given the huge wealth across other much larger sectors of the economy.
“The Premier League is one of the UK’s biggest success stories over the last 25 years, contributing huge amounts to the Exchequer in terms of tax on salaries, VAT on ticket sales and broadcast income.
“The amounts at stake here seem relatively low given image rights structures are not used by the majority of Premier League clubs, and may well turn out to be more rhetoric than real revenue raiser.”
Image rights in football: a brief history
Image rights companies are a long-standing subject of scrutiny, with HMRC arguing at a landmark case 25 years ago that they were little more than a “smokescreen”.
That case centred on Arsenal and their players Dennis Bergkamp and David Platt, who successfully argued that image rights companies provided services that went beyond the individuals’ contractual obligations and were therefore.
Since then tax authorities have generally accepted the validity of such arrangements, and it is not clear exactly how the government intends to address this.
Players image rights companies can bank millions of pounds per year, with current Arsenal and England star Bukayo Saka’s last year reporting revenue of £4.6m.
Tom Wilson, head of sport at accountancy firm HaysMac, said any moves were “likely to have an impact on remuneration structures particularly at the top of the various team sports”.
“It will be interesting to see how the legislation is drafted, to seek to bring payments for commercial services structured through companies established for that purpose are brought within the ambit of employment tax,” said Hackleton.
Sport lawyer Andrew Nixon, a partner at Sheridans, said he was keen to “see the detail behind the planned for legislation as it could have a significant impact. The fact it states ‘all payments for image rights related to employment will be taxable as employment income’ seems to leave some room for manoeuvre, however.”