Abstract
The COVID-19 pandemic has raised and will continue to raise issues for sport for some time to come. In particular, the pressure put on athletes by politicians to take wage deductions and wage deferrals has caused controversy. This scrutiny of athletes’ tax affairs is not unusual, given the particular and somewhat constant media focus, coupled with HMRC’s ‘Football Compliance Project’ regarding footballer’s use of image rights companies to make tax deductions. This focus often presents footballers in an unflattering light. However, the purpose of this article is to demonstrate that the issues regarding athlete image rights are generally not due to overly sophisticated or overt actions by footballers and/or their agents but are the consequence of a convoluted system of taxation. Ultimately, HMRC guidance allows athletes to exploit an ‘image right’ to make tax savings. This ‘image right’ does not exist in law. Thus, this article will show that the current controversy surrounding footballers and their tax affairs is not a novel concept and that in the context of image rights athletes, clubs and agents have been forced to navigate a system of tax which is confusing, at best. In short, the issues surrounding footballers and image rights are due to the fact that ‘image rights’ are protected in one area of law yet do not exist in another.
Highlights
The COVID-19 pandemic has and will continue to have an unprecedented and unknown economic impact around the world for some time to come
In the midst of the COVID-19 pandemic, the taxation of athletes has once again been brought to the attention of the media and the public, through the scrutiny of politicians
Given the ‘#playerstogether’ initiative, the money donated to the NHS by professional footballers, and the fact that athletes have potentially lost a year of their careers, perhaps rather than ‘calling out’ individuals for tax avoidance, it should be acknowledged that athletes contribute a significant amount of tax through the PAYE system
Summary
Before dissecting the specifics of image rights and taxation, it is first necessary to highlight the tax authority’s consideration of image rights payments. The ‘Club cap’ “states that clubs can make maximum total image rights payments to all image rights companies of 15% of commercial income”,32 whilst the player cap sits at 20% of the total of salary payments made to any one player in the tax year.33 In spite of these apparent agreements, HMRC’s Football Compliance Project is indicative of continuing issues of non-compliance, but as this article will illustrate, this is due to the non-existence of an image right in law and lack of guidance as to what ‘image’ constitutes. Were Sports Club to be decided today, it is a plausible argument that clubs’ payments to a third party, in this case an image rights company, could be regarded as employment income by virtue of the precedent set down in Rangers This argument may be a useful weapon for HMRC in utilising the Football Compliance Project.. It has been argued that “when added to professional guidance, this enables a robust approach to image rights planning under the current legislation and guidance”,43 this paper will show that in spite of the useful guidance of the tax tribunal in Hull City, the recognition of image rights within taxation without a structured legal framework in any other area of law will continue to facilitate a convoluted system of tax which requires reform
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