What is the new HMRC guidance for football agent payments?
HMRC has been carrying out an increasing number of investigations into footballers and their agents over recent years, with football agent payments being a particular focus in this respect.
The tax body has wide investigative authority and powers of enforcement when it comes to unpaid tax, and it’s important for footballers, their agents, and football clubs to understand their obligations if an investigation is started.
So what are the issues surrounding football agent payments, and what is the new HMRC guidance?
HMRC and football agent payments
Football agents typically act for a player and their club when brokering a transfer deal or negotiating a new contract. This situation is known as dual representation, with the premise of a dual representation agreement being that half of the agent’s fee is paid by the club and half by the player.
The arrangement was previously accepted in principle by HMRC, but they’re now clamping down on dual representation agreements. This is with a view to establishing the proportion of work actually carried out by an agent on behalf of a player.
Football clubs typically pay the agent’s fee in full, with half being paid on behalf of the player, so creating a benefit-in-kind that should be reported by the player via a P11D. HMRC are now scrutinising this practice to ensure a benefit-in-kind has been reported and not been understated.
Agents must pay tax and National Insurance Contributions on fees they receive from a player, but they don’t need to do so on fees paid by a club. Furthermore, clubs can reclaim all the VAT associated with an agent’s fees, so they may be reclaiming 100% of the VAT rather than 50%, leaving HMRC ‘out-of-pocket.’
New guidance from HMRC on football agent payments
HMRC will look closely at the detail of representation agreements where they believe a P11D contains an inaccurate figure with regard to football agent fees. Essentially, they’ll expect football clubs to be able to back up their apportionment of agents’ fees.
Clubs, football players, and agents will need to retain documentary evidence of discussions and final arrangements with regard to representation agreements. This introduces a heavy administrative burden for all involved, but it’s crucial for all parties to be aware of this requirement so they can defend their position should a tax tribunal take place in the future.
Seeking further accountancy help over new HMRC football agent payments rules
The apportionment of fees for a football agent’s services is a key focus for HMRC. The new guidance issued on 31st March 2021, shows the tax body views the previous arrangements as a potential tax loophole that needs to be closed.
If you need further advice on the new HMRC guidance for football agent payments, Handpicked Accountants can help. We’ll provide you with reliable recommendations for qualified accountants in your area. Our referrals are based on longstanding professional relationships with accountants around the country, so please call one of our expert team to find out more.