HMRC begins to target the football industry for underpaid tax

Lubbock Fine, 14 October 2021

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As the COVID-19 support measures begin to end, HMRC continue their investigations for unpaid tax. One area that seems to have caught HMRC’s eye is the sports sector, and in particular the football industry.

Football is now a multi-billion-pound industry with eight figure transfers fees becoming common place. These huge sums have led to increased scrutiny by HMRC, particularly focusing on agent fees and seeking to ensure they have been reported and taxed correctly.

What is the common pattern in recent HMRC investigations?

With most HMRC offices being lightly staffed during the pandemic, and resources being stretched to assist with COVID-19 support schemes, HMRC have had to curtail their usual enquiry activity.

As the COVID-19 support schemes begin to end, HMRC are likely to take a more targeted approach by focusing on offshore non-compliance, COVID-19 related fraud and perceived lucrative tax generators such as the football and entertainment industries.

How has HMRC dealt with football clubs in the past?

In the past, HMRC have not been afraid to tackle perceived abuses by clubs, players, agents or those professional advisors devising so-called “clever” legal, tax mitigating schemes. For example, in July 2017, HMRC won a Supreme Court case against Glasgow Rangers, effectively outlawing the use of the Employee Benefit Trust (EBT) loan type schemes as a method of avoiding payroll taxes. 

Over the last few years, HMRC have sometimes undertaken unannounced dawn raids on several high-profile football clubs including Newcastle United, West Ham and Chelsea. In one example, HMRC conducted a raid resulting in several arrests in which 180 officers were deployed to seize business records, financial data, computers and mobile phones. French authorities also assisted the UK in further investigations.

Who are HMRC primarily targeting now?

The main target groups are clubs, footballers and agents. 

Recently, HMRC have begun targeting payments to agents (including any received by the player) and payments for image rights that should be taxed as employment income (one example case is Hull City Tigers v HMRC). Also under observation are the numerous expenses and benefits paid by clubs to players as part of their lucrative salary packages, which may have avoided the correct tax treatment.

The issue of payments for the use of a player’s image rights is a controversial issue for HMRC. The status of such off-payroll payments are regularly challenged by HMRC, especially when payments are made to a company and controlled by the player. The tax treatment of payments to an instantly recognisable player with substantial commercial promotional contracts would no doubt differ to those made to one with little or no brand recognition.  

HMRC have also begun approaching agents directly to provide information about their own tax affairs, particularly focussing on treatment of the income received from clubs and other 3rd parties. Agents are often asked to provide information about the income received from a club and any other payments that an agent makes to other parties in transfer chain. Records such as letters, emails, texts are regularly requested by HMRC and so careful consideration should be taken before any information is passed to HMRC.

What are the consequences of an HMRC investigation?

For clubs, players and agents, the cost of getting their tax affairs wrong can be eye-watering. If HMRC deem a tax failure is due to deliberate behaviour, it can result in assessing up to 20 years of any untaxed income and gains. Along with mandatory interest, HMRC can charge tax-based penalties that can be as high as 200%.

However, if a HMRC enquiry is handled correctly, tax penalties can be mitigated through negotiation (sometimes to nil) or suspended for a short period of time.  In addition, lower penalties can be achieved if a voluntary disclosure is made to HMRC, before being prompted by an unexpected letter or call.  

How can we help?

At Lubbock Fine we have a dedicated Sports Desk of accountants and tax advisers. If you would like to discuss any sports or tax enquiries, please get in touch with our Head of Sports Desk Russell Rich ( or for HMRC enquiries our Tax Director Graham Caddock (