12 12 2016

HMRC Supports Review Of Tax Rules On Image Rights

The UK Public Accounts Committee (PAC) heard from HM Revenue and Customs (HMRC) at its hearing on December 7 on the UK's response to the Panama Papers leak and the tax avoidance connected to image rights.

On the Panama Papers, HMRC Chief Executive and Permanent Secretary Jon Thompson told the Committee civil or criminal investigations had been launched into the affairs of 22 individuals. He said 43 HNWIs potentially liable to UK tax had been named in the papers.

Turning to discuss the affairs of footballers, Thompson said that it has worked with the UK Football Association on educating players about tax compliance but underscored that the agency never provides tax advice. Discussing image rights – paid to players for the use of their image, for instance in advertising – Thompson noted that image rights and regular income may be legally separated as income streams on the basis of a court ruling in the year 2000.

Asked whether there should be a review of the legality of separating income into these two income streams to mitigate tax liability, Thompson said "I think if it was me, I would want to review this." He said HMRC collects information from 56 clubs to establish whether the amount of players' income attributed to image rights is reasonable. He noted, for instance, that HMRC may challenge arrangements where a relatively unknown reserve player reports a considerable proportion of their income as image rights.

HMRC's Director General of Enforcement and Compliance, Jennie Granger, told the Committee that it has a dedicated team, which is currently probing the affairs of 43 players, eight agents, and 12 clubs. She said that HMRC is looking into the validity of some players' claims to separate their image rights income from their standard earnings. She noted also that HMRC is looking at tax avoidance schemes that have been marketed to around 100 footballers and said HMRC is seeking to encourage footballers to steer clear of such arrangements.

However, she noted that the issue of image rights spans beyond the football industry and started first in the entertainment industry, noting for instance how the estates and image rights of famous deceased persons are managed.