The transfer window has “slammed shut” with the season now in full swing. Whilst the amount spent by Premier League clubs has fallen from 2017, it remains the richest league in the world.
There is endless coverage of rumours, negotiations and deals, but there are still questions on how contracts negotiated with the involvement of an agent creates tax consequences for a professional footballer.
Premier League clubs paid agents £211m based on transfers from 1 February 2017 to 31 according to Football Association data. It is quite common that most contract negotiations are done on a ‘dual-representation’ basis, where the agent can elect to receive the commission that they are due from the transfer fee from the club rather than the player.
If you receive any benefits from your employer (company car, medical insurance) then this will typically result in you being liable for Benefit in Kind (P11D) tax. Contract negotiation assistance is no different in that Benefits in Kind are treated through the employer paying agency fees on the employee’s behalf.
Assuming all the deals were done on a dual-representation basis, the amount of personal tax paid by players over this period would have amounted to £47.5m based on everyone paying tax at the highest rate of 45%.
Unfortunately, there are no special rules or exemptions for professional footballers and so advising them generally requires the same skills and disciplines as for other high net worth clients; identify potential tax-saving opportunities, manage tolerance to risk and comply with all rules and regulations by HMRC to ensure there is no tax risk in the future.
In any event, unless the player is adequately warned by the club and/or their adviser, they can be left with a substantial and unforeseen liability. With the assistance of a financial adviser and an accountant, advice can be sought on the best route to utilise their full personal tax rates, allowances and reliefs.
Tax avoidance is no longer considered socially acceptable and HMRC has turned the tables on tax avoiders with tough new legislation and demands that they pay disputed tax up front. There are, however, still several ways in which the government encourages high earners to mitigate their tax bills, through the use of layering of reliefs blessed by the government such as tax-free allowance, pensions and tax-related investments.
The landscape has changed for tax planning, the tax tail is no longer wagging the investment dog and there is pure focus on the most efficient way
to use allowances rather than exploit aggressive tax schemes.
A career in football is relatively short-lived in most cases, so getting the right financial and tax advice is vital. Sedulo Sport is on-hand to educate players on how best to handle their finances as well as maximise their tax position. If you have any queries regarding any area of your personal finances, please contact Iwan Roberts at Sedulo Sport at [email protected]