10th August 2020
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Net Gains: As football gets richer, tax authorities come knocking.
The number of HMRC investigations into the tax affairs of footballers, professional clubs and agents more than doubled last year, as the UK taxman intensified a clampdown on aggressive avoidance.
Figures I’ve obtained under the Freedom of Information Act show that the HMRC’s Football Compliance Unit undertook 326 bespoke investigations into footballers, clubs and agents in 2019/20 – up from 133 the previous year.
There were 246 investigations into players’ tax affairs in 2019/20, almost triple the number (87) undertaken in 2018/19. The number of clubs investigated last year increased slightly to 25 in 2019/20, compared with 23 in 2018/19.
Interestingly, the number of football agents also under HMRC scrutiny more than doubled over the same period – from 23 in 2018/19 to 55 agents in 2019/20.
HMRC’s bespoke Football Compliance Project was launched in 2017 amid concerns that some people and organisations within the world’s most popular sport were using aggressive tax avoidance measures to minimise their payments within the UK – including diverting cash to offshore centres.
Since establishing the FCP, the taxman has recouped £157.3m in ‘additional tax identified’ by investigations – including a record haul of £73.1m in 2019/20. Some of the recovered money relates to firms set up to manage players’ or clubs’ image rights. One avoidance measure used by some sportsmen has been to establish a personal services company to manage their image rights, and pay only corporation tax (now 19% in the UK) on payments to that firm, rather than income tax (45%).
England’s Premier League is among the world’s wealthiest sports competitions because of its mega-money TV deal with broadcaster Sky Sports, among others. The cash-rich league has become a target for players and agents from all corners of the globe. According to the Deloitte Football Money League, Manchester United, England’s wealthiest club and the world’s third-richest, recorded annual revenues of £640m last year.
Barcelona, the world’s richest club in 2019/20, became the first to report annual revenues above three-quarters of a billion pounds.
Amid such wealth, HMRC has grown concerned at the use of various measures to minimise tax payments within UK football. Few players or clubs have fallen foul of domestic tax law – tax avoidance is not illegal, but tax evasion is. But HMRC this week refused to confirm to me whether any clubs have been prosecuted, or how many have been fined, following its FCP tax investigations.
At least one professional football cub, however, has been investigated for suspected or potential money laundering in recent years.
Appearing before the Treasury select committee in 2018, then-Home Office minister Ben Wallace said: “I know of professional football clubs under investigation. I could not reveal how many and which they are, because that is an operational matter,”
“There are live investigations that go on all the time. To expand any more could threaten investigations.”
But responding to my FOI request, HMRC said the cost of complying with requests for further information on football-related prosecutions (of players, clubs or agents) and fines would exceed the legal limit.
As the sport of football has grown more prosperous, some European tax authorities have taken a hard line on clear examples of tax breaches. In 2014, Spain’s authorities charged Barcelona’s superstar Lionel Messi, and his father, with tax fraud after discovering that the pair used tax havens in Belize and Uruguay to conceal earnings from the players’ image rights.
Messi was eventually found guilty of £3.5m worth of tax evasion. He was fined £1.8m and given a suspended sentence.
Real Madrid superstar Cristiano Ronaldo and the club’s former manager, Jose Mourinho, have also been found guilty, and given suspended sentences, following similar tax breaches.
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