Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Tax and football: The image rights issue

by
8th Feb 2010
Save content
Have you found this content useful? Use the button above to save it to your profile.

Simon Sweetman assesses the  tax position of football clubs in relation to their players' image rights.

There was good news for the Premier League in November, as it seems Spain has had enough of its 24% tax rate for foreign footballers and those signing new contracts from 1 January 2010 will pay 43%. Presumably this will make English football a little more attractive.

This was tainted somewhat by news of Manchester United’s attempt to raise cash through a bond issue. The club is currently in talks with HMRC over the issue of image rights, as the revenue believes that payments made to players for their image rights are actually a form of disguised remuneration.

It has been common knowledge for some time that this method was being used as part of the remuneration package offered to attract new players, particularly those with non-domiciled status who will probably see the payments for image rights go to offshore companies. This would seem to be fairly widespread, at least at Premier League level, since Wigan Athletic mentioned last year that it was also in dialogue with HMRC on the subject.

In a press release last February, Frank Goldberg of BDO also mentioned ‘golden hellos’ as another way of avoiding the payment of remuneration, although that seems surprising as they appear to be obviously taxable (unless perhaps they are seen as compensation for having to live in England).

According to evidence given in the high court in Paris last year by FIFA’s general secretary, the image rights wheeze came about after the 1998 World Cup, although that may just mean that various exchanges of information between members of the French squad at that tournament brought the idea to the attention of clubs in La Ligue who were not up to date with the latest London financial practices.

What constitutes 'image rights'?
As a mere amateur in such matters, I have to ask what exactly the clubs are paying for here? The right to put photos of players on their websites? The right to put their names on the back of replica shirts? It would appear that when David Beckham was at Old Trafford he shared his image rights with the club, which I suspect did not get its hands on his advertising income.

Football Agents Direct describes the position as follows:
"The FA players’ contract, if signed without modification, means you are signing away most of your rights to income outside of football, which can be substantial".

As far as one can tell from online research, this appears to be nonsense - the image rights belong and continue to belong to the player as a matter of law unless the player specifically gives them away. It is hard to believe that players would deliberately sign away all their non-playing income to their employer in return for something which has always seemed open to challenge as remuneration.

A clue may be contained in a news report from last summer on Christiano Ronaldo’s negotiations with Real Madrid, when it was reported that his representatives want to ensure he makes about £2.75m a year extra from the earnings from partners like Nike.

Real Madrid is said to want a 50-50 split over commercial earnings, with Ronaldo benefiting in the same way from Real merchandise with his name on it.

This week the Telegraph also reported that Newcastle United is still paying Joey Barton £675,000 a year for his image rights. The Telegraph explains it thus:

“When a player signs for a club he has two options. Either he seeks to profit from selling his own image rights, or he lets the club use his image in exch¬ange for an annual payment. This payment goes into the player's 'image company', many of which are based offshore. Almost all players opt for the latter”.

This is also odd (apart from the valuation one might expect to place on Joey Barton’s image rights). It’s hard to see how such an arrangement (where the club is effectively leasing all or part of the image rights) could be anything but taxable income for the player. Perhaps this is where the offshore companies come in.

All of this presents more financial problems Premier League clubs at a time when their ‘business’ models appear to be creaking. A few months ago Simon Kuper suggested that football should stop pretending that it is a serious business, and pointed out that the total revenue from European football in 2007/8 was €14.6 billion – about a quarter of Tesco’s. He then said there were about six clubs that could actually generate enough income to live comfortably. He mentioned two by name and one of them was Manchester United - that looks a bit uncomfortable now.

Tags:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.