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Exchequer scores billions in tax from Premier League

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Despite the financial turmoil triggered by Covid-19 Premier League football clubs generated a total tax contribution of £3.6bn to the UK Exchequer in 2019/20, according to a report by professional services firm EY.

27th Jan 2022
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Trumpeting the league and clubs’ ability to deliver significant economic activity through commercial relationships and supply chains, EY’s report reveals that Premier League players contributed £1.4bn in tax in a season when play was suspended for more than three months due to the pandemic.

The total tax contribution underpinned by clubs has increased by £3.1bn since 1998/99, it said, while their economic activity has grown by 840%.

The Premier League contributed £7.6bn to the UK economy during 2019/20, equal to pre-pandemic levels and the amount generated in 2016/17, despite an estimated £1.3bn loss in broadcast and matchday revenues for that period and 2020/21 due to league matches being played behind closed doors.

If the 2019/20 season had not been disrupted by Covid, EY estimated the economic impacts as £3.9bn in tax revenues (up £300m), £8.7bn in GVA (increase of £1.1bn) and £6.1bn in revenue (up £1bn).

Behind the headlines

The eye-catching figures burnish the league’s global image but contrast starkly with the financial struggles of clubs outside the top-flight, notably the plight of Derby County.

The Championship side is currently in administration and desperately seeking a preferred bidder to fund the club through the remainder of the season and complete a takeover.

EPL clubs, beneficiaries of international broadcast revenues totalling £1.4bn in 2019/20, will feign some concern about Derby but they are largely protective of their own. Instead, league and club bosses say economic impacts extend to providing solidarity and parachute payments to 138 EFL and National League clubs. Another £455m was distributed to other leagues and community football.

Premier League and clubs’ expenditure included £2.9bn on wages and salaries and £1.8bn on supply chain spending, according to the EY analysis.

Rob Wilson, a football finance expert from Sheffield Hallam University, says the study “demonstrates the economic power that sport can have in regional economies, and the social impact that the clubs have within their communities.

“Covid demonstrated the importance of this impact, not least through revenue reductions on match days.”

From a tax and accounting perspective, EPL clubs, players and their agents frequently come under fire for high transfer fees and weekly wages.

“What this report shows are the increasingly high tax revenues that are generated, through standard taxation of PAYE but also the additional tax revenues that are generated through economic prosperity – higher VAT returns from businesses serving match day crowds, for instance,” he explains.

But he says the report doesn’t address the displacement affect. “If you are spending at football, you are not spending in shops, cinemas etc. The opportunity cost is also significant, and not measured here,” he tells AccountingWEB.

University of Liverpool Management School football finance expert Kieran Maguire agrees, adding: “Where the Premier League does contribute is in sucking in money from overseas in the form of broadcast and commercial deals, taxation paid by international players etc. How much additional/marginal benefit is generated is far lower than the quoted figures.”

Premier League clubs could contribute more

Both Wilson and Maguire believe the Premier League and its clubs could do more to contribute to the UK economy.

Wilson claims most of the clubs’ economic contribution is a by-product of the ‘match’, notwithstanding fans travelling for tourism purposes such as a stadium tour at Old Trafford.

“Because of this, one might argue that clubs could make higher donations to community groups. Yet that is an easy criticism. The reality is that clubs work with local businesses to ensure that there is a strong offer for matchday crowds; they also provide significant support for their community programmes to tackle inequality.”

Maguire, who covers the game on his Price of Football website and podcast, insists the football industry could generate more tax revenues for the economy if 100% of players’ remuneration was treated as employment earnings.

“At present in the EPL, many players have image rights companies which take a proportion on their income. Instead of paying tax at 45% through PAYE, these companies pay 19% corporation tax on profits… although the player or his fellow shareholders who are usually family members will pay tax if the rights company subsequently pays them a salary/dividends.”

The haves and have-nots

Against the backdrop of Derby County’s battle for survival, a cautionary tale of overspending and financial mismanagement in recent seasons, Chancellor Rishi Sunak welcomed EY’s report, saying it was “fantastic that the Premier League has contributed billions to the economy throughout the pandemic”.

Wilson says Derby’s fight to avoid expulsion from the EFL highlights the central problem with the report – the gulf in economic impacts between football’s haves and have-nots.

“Many clubs outside the Premier League struggle for liquidity. Their debts significantly outweigh their revenue, and they consistently lose money,” he says. “This isn’t sustainable. In many ways, the inequality –and awful decision-making in the case of Derby – highlight that if a club goes down, so too does the economic impact in the community – the very impact that this report highlights.”

Maguire proposes greater scrutiny and improved governance within the football industry to prevent other clubs following Derby into financial ruin: “Mel Morris [former Derby owner] was able to break company law with impunity by not publishing statutory accounts, game the financial fair play system and deduct PAYE/NI of about £30m from employee pay packets and not pay it across to HMRC, effectively defrauding the exchequer.

“He then put the club into administration and requested an appearance before MPs to blame all of the club’s problems on the EFL and Covid, rather than his own mismanagement.”

Replies (4)

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By Justin Bryant
28th Jan 2022 10:29

I bet they'd all rather be racing drivers so they could avoid all that by living in Monaco.

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By Paul Crowley
28th Jan 2022 13:06

"Despite the financial turmoil triggered by Covid-19 Premier League football clubs generated a total tax contribution of £3.6bn to the UK Exchequer in 2019/20, according to a report by professional services firm EY."

The standalone single figure has no context

I would want the comparable figures for at least 3 or 4 years to be able to get invested in the story
Is it bigger than prior year but a long way down from the year before?

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Replying to Paul Crowley:
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By Hugo Fair
28th Jan 2022 15:23

Thank goodness, I thought it was just me!
I read and re-read the first paras (with fin figures mentioned) several times trying to work out which were relatable to each other ... and came to conclusion that the answer was None.

For instance "Premier League players contributed £1.4bn in tax in a season" is presumably on top of the "Premier League football clubs generated a total tax contribution of £3.6bn to the UK Exchequer in 2019/20"? But who knows?

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By AndrewV12
15th Feb 2022 13:38

HMRC has come along way, not that long ago they were hopeless at collecting taxes from Clubs and players.

One think I believe has helped the Chancellor is that clubs negotiate their wage demands after tax, not before tax.

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