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Dog on football | AccountingWEB | HMRC casts wider net on football transfers
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HMRC casts wider net on football-transfers tax

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With HMRC updating its guidance on the tax consequences of dual representation in football transfers, the tax authority may now look back into previous high-profile transfers where the amounts involved are likely to be substantial.

6th Jun 2024
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The way football clubs in England conduct transfers may soon change, an industry expert has told AccountingWEB, as HMRC looks to clamp down on the millions of pounds in tax it may have missed out on across previous deals.

Dual representation

Football agents brokering transfers can offer their services to both players and the selling or buying club – this is known as dual representation, with the two having different tax liabilities.

Agent fees paid by a club are tax deductible but those by a player are not, notes the Chartered Institute of Taxation (CIOT), yet fees charged to a player by an agent are often paid by the club.

When this happens, the VAT-inclusive cost of that fee “should be considered taxable income for the player as a benefit in kind”.

The Football Association’s updated Football Agent Regulations entered into force on 1 January 2024, following which HMRC updated its guidance on the tax consequences of dual representation and subsequently warned that those same agents must provide a breakdown of what percentage of their work was for the player and the club.

The CIOT believes HMRC could now look back at previous transfers, especially “high-profile cases where the amounts are likely to be substantial”.

Unique business

Sofia Thomas, chair of the International Sports Tax Association, told AccountingWEB that HMRC has a history of commenting on football agents’ fees and, in these regulations, we see it looking at the position “holistically and not just the income tax and benefits-in-kind point”.

“Football as a business is unique and the detail in these regulations shows that HMRC has spent time trying to understand the industry and nature of how the transfer market works.

“It’s important to note that no laws have actually changed. This is merely new HMRC guidance. I do not think this will impact the transfer activity of transfers in and out of England.”

Changing transfers

While Thomas doesn’t believe activity will be affected, she does think the backend of transfers may change.

“I think we will see more record-keeping both by agents and clubs, and an increased awareness that transactions they are entering into now could come under the scope of an enquiry. You may also see an increased reluctance from clubs – which is already present – to engage in dual-agent representation agreements.

“There’s an interesting small piece in the guidance that notes that any payments to players’ families to induce the player to sign at a club is employment income taxable on the player.

“While I don’t agree with this categorisation, it shows how wide HMRC is now casting the net when considering the whole picture of a transfer.”

High-profile scrutiny

As for the possibility of high-profile deals being scrutinised, Thomas concluded: “We know from freedom of information requests that HMRC has many active investigations into professional footballers and one can speculate that the majority of these will be into agents fees.

“There has also been a recent case on agents fees making it to the tribunal, so it appears the appetite is there from HMRC.

“I think we can assume that these enquiries and investigations will continue.”

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