As part of its crackdown on tax evasion and avoidance, HMRC is targeting complex salary structures; including certain aggressive image rights payments, employee benefit trusts (EBTs), agent payments and other third-party sponsorship income.
The fallout of non-compliance could be a large tax bill or National Insurance contribution liability for clubs.
In its annual Football Finance Directors Survey 2017, accountancy firm BDO found that across all football leagues, from the English Premier League (EPL) to League Two plus the Scottish Premiership, clubs’ confidence in their tax affairs has fallen from 73% in 2016 to 55% this year.
In July, the UK Supreme Court ruled in favour of HMRC in its seven-year pursuit of Rangers Football Club for aiding and abetting tax avoidance using EBTs.
More than £47m ($61m, €51.7m) was paid to players, managers and directors between 2001 and 2010 in tax-free loans using EBTs in Jersey. The club entered liquidation in October 2012.
The UK taxman, however, is facing claims that it unlawfully raided Newcastle United and seized documents over a suspected £5m income tax and national insurance fraud linked to transfer deals with French club Marseille.
According to the BDO survey, EPL teams were the most concerned about HMRC continuing to target individual players with tax enquiries in relation to aggressive tax schemes, agents’ fees and image rights payments.
Across all leagues, 55% of respondents said that this was not an issue as their club has a conservative approach to player payment management.
However, when broken down, only 21% of EPL clubs said this, compared with 82% of League One and 80% of League Two teams.
EPL clubs were mostly concerned that the issue was distracting for players (21%) but believed that it was largely a player matter and did not involve the club (29%).
They admitted, however, that the crackdown is changing the way 7% of EPL clubs deal with player earnings.
High profile names
The football world has increasingly been in the tax spotlight, not least because of the eyewatering sums of money paid to and for international stars.
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