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#Post#: 61080--------------------------------------------------
HMRC to probe salary paid as "image rights"
DIR By: Nico Wilson
Date: March 9, 2021, 12:33 am
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Link:
HTML https://inews.co.uk/news/hmrc-probes-english-rugbys-leading-clubs-over-salary-payments-904255
--- Quote ---
>
> HMRC probes English rugby’s leading clubs over salary payments
>
> EXCLUSIVE The tax authority’s investigation into the 12
Premiership clubs, plus Championship side Saracens, could lead
to a raft of salary-cap breaches if image-rights deals for
players are found to have been overvalued
>
> By David Parsley, Hugh Godwin
> March 8, 2021 7:05 pm(Updated 8:21 pm)
>
> England’s elite rugby clubs are facing a wide-scale
investigation by tax officials into how payments to players and
agents are accounted for, i can reveal.
>
> The move from Her Majesty’s Revenue and Customs (HMRC) follows
a similar probe into football, which resulted in players and
agents being forced to hand over millions in unpaid taxes.
>
> HMRC is understood to have launched the investigation into
each of the 12 Premiership clubs, as well as Saracens, which
remains a shareholder in the top-flight league despite playing
in the Championship – the sports second-tier – this season.
>
> The tax probe is believed to be focused on payments that
players receive on top of their club salaries, as well as the
role of agents in transfer and contract negotiations. It comes
at a tough time for clubs who have lost tens of millions during
the Covid-19 pandemic with no income from tickets sales or
matchday spending by fans.
>
> HMRC is looking to recover unpaid taxes on earnings players
accrue via channels away from their playing contracts, including
image-rights deals. Players are paid additional money on top of
salary for the use of their image by their club, such as in
advertising and endorsements.
>
> This additional income is often paid to a company set up by
the player and is only taxed at the 19 per cent corporation tax
rate, rather than at the 45 per cent income tax rate top players
pay on their general salaries.
>
> Tax officials will also look for payments being made to
offshore companies and via other tax efficient channels to
determine whether or not players have paid all tax due.
>
> HMRC will investigate individual deals, and if it believes the
amount paid for image rights is more than the true value it will
demand the payment of back-taxes and enforce fines.
>
> The investigation is confirmed in Saracens latest annual
accounts. In its figures filed to Companies House, the club
notes: “In line with other Premiership rugby clubs, Saracens has
received a ‘Check of Employer Scheme Records’ notice from HMRC.”
>
> Asked by i about the investigation, three directors from
different clubs confirmed the investigation included all the 13
of the Premiership’s shareholding clubs.
>
> The 12 clubs currently playing in the Premiership, plus
Saracens, own 73 per cent of Premiership Rugby Limited (PRL),
the league’s governing body. The remaining 27 per cent is owned
by venture capital investor CVC Capital Partners.
>
> In recent years HMRC has made clear that payments it considers
are, in reality, earnings accrued as a result of a player’s
general role cannot be treated as ‘image rights’ for tax
purposes.
>
> The probe will also consider the role of agents in
professional rugby. HMRC will enquire into a case of what is
known as ‘dual representation’, where there is evidence to
suggest that an agent has not worked for both parties on the
basis of the fee split that has been declared and against which
tax has been calculated.
>
> A spokesman for HMRC said: “HMRC works closely with
professional sports clubs, players and agents to help support
them in getting their tax right, stepping in to put right any
mistakes to ensure they are compliant with their tax
obligations, as we do with other UK taxpayers.
>
> “We look forward to continued co-operation with clubs and
players throughout 2021, particularly during these challenging
times.”
>
> Last year Saracens were relegated to the Championship after
being found guilty of breaching the game’s salary cap over three
seasons.
>
> While the HMRC probe is not connected to the Premiership’s
salary cap – which limits the amount any one club can spend on
its squad – it could spark a series of investigations into
potential cap breaches by PRL.
>
> Under Premiership rules a club can spend £6.4m on players in
the current season. Clubs can also benefit from a number of
player credits.
>
> However, many clubs spend as close as they can without going
over the cap. If HMRC deems some players’ image rights payments
as salary, then there is a danger some higher spending clubs
could find themselves in breach of the cap.
>
> This could lead to a number of clubs being put into a similar
situation to Saracens and forced to face to prospect of
relegation for an overspend on their squads.
>
> PRL declined to comment.
>
--- End Quote ---
#Post#: 61084--------------------------------------------------
Re: HMRC to probe salary paid as "image rights"
DIR By: Banstead Quin
Date: March 9, 2021, 3:36 am
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Stable door and bolted horses, anyone?
Not sure you can relegate the whole premiership, that would be
funny. Also I assume this is a way of being paid around the
existing rules exploiting a loophole. It's not the law as such.
So the probable outcome will be a tightening of the rules from
next season. Although I'm not an accountant so don't really
understand the nuances.
If it were true it will impact those clubs with more superstar
names. I wonder who that could be???
#Post#: 61088--------------------------------------------------
Re: HMRC to probe salary paid as "image rights"
DIR By: Fearless Fred
Date: March 9, 2021, 3:42 am
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I'm not sure this would necessarily fall foul of the Celery cap
anyway if it has been properly reported in the accounts. It's
the HMRC looking at the tax side of things, not the cap. If the
club has reported the fees paid for Image Rights & other
ancillaries within the Celery Cap paperwork, then they can be
fully compliant with the Cap while still potentially being a Tax
issue with HMRC. The only thing that might be an issue is if
there are payments uncovered by Mr Taxman that haven't been
declared to the Cap (offshore payments for example).
#Post#: 61089--------------------------------------------------
Re: HMRC to probe salary paid as "image rights"
DIR By: Banstead Quin
Date: March 9, 2021, 3:43 am
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Makes sense to me Fred.
#Post#: 61090--------------------------------------------------
Re: HMRC to probe salary paid as "image rights"
DIR By: Donuts
Date: March 9, 2021, 3:46 am
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Not hard to find so just a question of how they valued their
image rights
Danny has one for example
HTML https://find-and-update.company-information.service.gov.uk/company/07074832
#Post#: 61093--------------------------------------------------
Re: HMRC to probe salary paid as "image rights"
DIR By: poorfour
Date: March 9, 2021, 3:58 am
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The issue is that if HMRC finds that the clubs have been
overpaying for image rights, then the Salary Cap Manager will
start getting very interested in how much money has been paid
via image rights and whether it's been declared within the cap.
As to what action that results in, it's likely to depend on how
widespread it is and how egregious the breaches were. If most of
the clubs have overpaid on a similar scale, then they'll
probably agree not to do it again and move on. If one or two
clubs have used it to seriously manipulate the cap, they may
face fines or points deductions. I think it's unlikely that
there'll be another relegation issue unless it turns out that,
say, Bristol players have been being paid a fortune outside the
cap for advertising Hargreaves Lansdown (note for lawyers: this
is a purely hypothetical scenario and I am not alleging that
they have done this or anyone has done anything similar).
The other thing to remember is that the ultimate arbiter of
sanctions is the PRL, whose majority owners are the clubs
themselves. The sanctions against Saracens came about because it
became apparent that they had been systematically disadvantaging
the other clubs for years by cheating on the cap. If another
club has been doing something similar, then they could be in
trouble. If everyone has been doing something similar that comes
to light because of HMRC deciding that it needs a different tax
treatment, then it's likely just to end up as an agreement Not
To Do It Again.
#Post#: 61094--------------------------------------------------
Re: HMRC to probe salary paid as "image rights"
DIR By: Fearless Fred
Date: March 9, 2021, 4:13 am
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The current regs make it clear that the player is responsible
for providing in a timely manner the tax details for Image
Rights payments including those paid to any entity/company that
they are using to manage such payments. If it has been declared
properly, even if there are tax issues, then the SC is being
complied with. If the player & club are working the tax
loopholes of payments to player owned companies, then they can
be in breach of the Tax loopholes without breaking the Salary
cap.
I can see what you're saying, poorfour, but I doubt the Salary
Cup Manager cares whether Image Rights have been inflated and
base salary kept low (to reduce the tax the player pays) if the
payments are all declared in the SC statements. It's only if
payments are hidden/not declared that the SC Manager will start
digging.
#Post#: 61137--------------------------------------------------
Re: HMRC to probe salary paid as "image rights"
DIR By: Pickled Pelicon
Date: March 9, 2021, 12:30 pm
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It may depend on whether HMRC says "that's not image rights,
that should be counted as salary, taxed at 45%", then that could
encroach on SC, multiply that by a number of players, with a
club currently up to the SC limit!!!!
#Post#: 61138--------------------------------------------------
Re: HMRC to probe salary paid as "image rights"
DIR By: Somardino
Date: March 9, 2021, 1:25 pm
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Poor fact checking for this article. Image rights payments from
Clubs are considered part of ‘Permitted Salary’ under Schedule
2A of the Premiership Rugby Salary Cap Regulations and are
already counted as part of the Cap. Some players may end up
owing additional tax, but this won’t have any impact to the SC
unless the investigation uncovers some otherwise hidden
payments.
Edit: failed to update / check before posting and this point has
already been made.
#Post#: 61144--------------------------------------------------
Re: HMRC to probe salary paid as "image rights"
DIR By: Nico Wilson
Date: March 9, 2021, 3:04 pm
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As I understand it, this investigation relates to the part of
salary that is paid as "Image Rights" to a limited company
instead of via the PAYE route. The amount paid as salary and as
Image Rights are already both declared to the Salary Cap Manager
and, unless the status quo changes, do not present a problem
under the salary cap rules.
The benefit to the player of receiving money via a limited
company is that the player will end up paying less tax.
HMRC may decide that too much of the salary is paid via Image
Rights and may decide that it should be treated as PAYE salary
and be taxed accordingly. The result will be that the player
will have an increased tax bill.
The question is then - who pays the tax bill? If it's the player
then they (obviously) won't be happy but as it's impacting every
player using this structure then there's not a lot that they can
do about it. If it's the club, then the extra money may take the
club over the salary cap, and this is where the problems will
start......
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