HMRC could have missed out on millions of pounds in tax from football transfers, says the CIOT.
Football agents brokering transfers can offer their services to both players and the selling or buying club, known as ‘dual representation’. However, the two have different tax liabilities, with agent fees paid by a club tax deductible but those by a player not.
Yet fees charged to a player by an agent are often paid by the club and, when this happens, the VAT-inclusive cost of that fee should be considered taxable income for the player as a benefit-in-kind.
Following the FA’s updated Football Agent Regulations which entered into force on 1 January 2024, HMRC updated their guidance on the tax consequences from dual representation arrangements. In the new guidance, HMRC have warned that dual representation agents must provide a breakdown of what percentage of their work was for the player and the club, and it “does not accept” a 50/50 split in agents’ fees as the default position.
The new regulations could see HMRC look back at previous transfers, especially high-profile cases where the amounts are likely to be substantial. They could also write to clubs, encouraging them to check they’ve applied the rules correctly to all transfers and continue to do so in the future.
CIOT immediate past president Gary Ashford said: ‘Fees to the agent are primarily paid by the player and are non-tax deductible, since the player won’t be VAT registered. The complication comes when these fees are paid by a club, which is VAT registered.
‘In these scenarios the club can only recover VAT on its own fee to the agent and not on services not received by it, such as the player fee. While in the past many transactions of this kind split the overall cost 50:50 between the club and player, HMRC’s view now is that should not be accepted automatically and where it’s not justified there is a loss of tax to the Exchequer.
‘HMRC also believe that in “dual representation” cases the agent primarily acts for the player, so any attempt to treat any part of the agent’s fees as payable by the club needs to be supported with a lot of evidence if it’s not to be subject to a “VAR”-style review.’
HMRC could have missed out on millions of pounds in tax from football transfers, says the CIOT.
Football agents brokering transfers can offer their services to both players and the selling or buying club, known as ‘dual representation’. However, the two have different tax liabilities, with agent fees paid by a club tax deductible but those by a player not.
Yet fees charged to a player by an agent are often paid by the club and, when this happens, the VAT-inclusive cost of that fee should be considered taxable income for the player as a benefit-in-kind.
Following the FA’s updated Football Agent Regulations which entered into force on 1 January 2024, HMRC updated their guidance on the tax consequences from dual representation arrangements. In the new guidance, HMRC have warned that dual representation agents must provide a breakdown of what percentage of their work was for the player and the club, and it “does not accept” a 50/50 split in agents’ fees as the default position.
The new regulations could see HMRC look back at previous transfers, especially high-profile cases where the amounts are likely to be substantial. They could also write to clubs, encouraging them to check they’ve applied the rules correctly to all transfers and continue to do so in the future.
CIOT immediate past president Gary Ashford said: ‘Fees to the agent are primarily paid by the player and are non-tax deductible, since the player won’t be VAT registered. The complication comes when these fees are paid by a club, which is VAT registered.
‘In these scenarios the club can only recover VAT on its own fee to the agent and not on services not received by it, such as the player fee. While in the past many transactions of this kind split the overall cost 50:50 between the club and player, HMRC’s view now is that should not be accepted automatically and where it’s not justified there is a loss of tax to the Exchequer.
‘HMRC also believe that in “dual representation” cases the agent primarily acts for the player, so any attempt to treat any part of the agent’s fees as payable by the club needs to be supported with a lot of evidence if it’s not to be subject to a “VAR”-style review.’
