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Tax investigations into UK football clubs have recovered £124.8m in unpaid tax in the past year, more than doubling the previous year’s total of £58.7m, according to UHY Hacker Young.
Recent examples of HMRC investigations include both Manchester United and Newcastle United, who stated in their most recent financial accounts that they are currently subject to investigations.
Additionally, former Manchester City boss and Premier League winner Manuel Pelligrini was fined £343k in 2022 for allegedly evading over £800k in tax.
Suspension by HMRC or FCA and criminal offences like tax evasion are now grounds for automatic disqualifications for owning or running a Premier League football club, following changes in March.
HMRC suspects that clubs are underpaying tax in National Insurance on payments on agents’ fees, suspecting clubs claim that just half of the fee is classed as a benefit in kind when it is usually a majority.
HMRC now requires clubs to report the agent’s fees on a P11D and National Insurance is paid, with the player paying tax on the benefit.
Another area of investigation is image rights payments, which are often made by clubs to a player’s company, allowing them to avoid paying National Insurance. HMRC suspects that clubs are paying intentionally overvalued fees for image rights, effectively paying disguised remuneration and evading National Insurance.
HMRC are also investigating benefits in kind, where a club pays for perks like flights and hotel rooms for players and their families. These are frequently going undeclared as payments to players, meaning that clubs may underpay National Insurance on the value of those benefits.
Elliott Buss, partner at UHY Hacker Young and a specialist in the taxation of sports clubs, said: “HMRC is really cracking down on the football industry to recover what it sees as a significant amount of unpaid tax. Football clubs are a subject of particular concern and HMRC now have these clubs’ tax affairs in their sights.
“The growing proportion of agents’ fees being paid by clubs is drawing the attention of the taxman to the possibility that not all tax due on these payments is being paid.”
He added: “Football clubs should seek professional advice on tax law compliance in order to avoid what can be lengthy and costly HMRC investigations.”
