Premier League clubs accused of ‘improper and possibly illegal behaviour over £470m avoided taxes’
Premier League clubs have avoided £470 million in tax since 2015, according to a financial think tank alleging “improper and possibly illegal behaviour” across the game.
In an extraordinary attack on clubs “artificially structuring their payments to football agents” during transfers, accountants claim HMRC missed out on £250 million between 2019 and 2021 alone.
“In our view this is failed tax avoidance – it was never compliant with the law, and HMRC can and should require all the lost tax to be repaid,” says the report published by Tax Policy Associates.
Football clubs “at all levels” are using this “artificial tax avoidance scheme to avoid VAT, income tax and national insurance/social security”, the report adds.
Claims of any potential illegality are heavily disputed within the footballing industry. Pete Hackleton, head of Sports & Entertainment at Saffery Champness LLP, which acts for more than 100 players across the Premier League, dismissed the suggestion in the report that so-called dual-representation is “an artificial contract”, and that agents are only acting for players.
“Having acted on hundreds of deals, including some of the biggest in the game, this is categorically not the case,” he said in a press release. “We have had various discussions with HMRC to explain how a contract/transfer negotiation typically works. Of the various HMRC enquiries that we have dealt with, the vast majority have been closed once evidence of the value the club gained from the work of the agent has been provided.”
However, Dan Neidle, the prominent critic of high-profile figures' tax affairs who conducted the report, said before BBC Newsnight's coverage of his findings on Thursday night: “I absolutely am suggesting improper and possibly illegal behaviour by football clubs. The scheme involves a fib — that agents provide significant value to clubs.”
Neidle, who stepped back from his work as a partner at Clifford Chance last year, had previously conducted an investigation into the tax affairs of Nadhim Zahawi, the former Chancellor.
The Premier League told Telegraph Sport in a statement: “The Premier League and clubs have regular discussions with HMRC about agent fees. Prior to 2021 there was an industry-standard position with HMRC, regarding the split between the player and club services provided by agents. In 2021 HMRC changed its guidance and clubs are fully aware of this detail. We believe that the overall figure suggested here is based on assumptions that do not recognise the individual circumstances of each transaction.”
Tax Policy Associates believes the HMRC is already investigating so-called “dual representation”, which sees an agent paid for acting for both the player and the club involved in the deal.
Effectively, under current standard practice within the game, when half of the agent’s fee is paid by the club, that half of the payment avoids tax. Yet if the agent’s fee is picked up solely by the player, HMRC can expect to receive around 60 per cent of the total payment in tax.
“In reality, these agents act for players,” the think tank says. “But the scheme works by constructing artificial contracts where the agent acts for the club as well as the player – so-called ‘dual representation contracts’. Half the fees are then paid by the club – even though it is the player who is really benefiting from all (or almost all) of the agent’s work – and these fees escape income tax, national insurance and VAT.”
The think tank, which worked with the BBC, adds: “There are potentially serious consequences for football. If HMRC were able to recover all £470 million then Premier League clubs would struggle to pay it – the Premier League’s total profits in 2022 were the largest for some time, but still only £479 million.”
HMRC said in a statement: “Dual representation cannot be assumed to be a tax avoidance scheme; its use can be tax compliant. However, we carefully scrutinise arrangements between clubs and employees, and we work closely with the football industry to educate and deal with tax risk head on.
“Our actions and the money brought in from this industry speak for themselves. Since 2015, from across all tax areas in the football industry, we’ve recovered £573 million that would otherwise have gone unpaid.”
The Premier League added: “During the 2019/2020 season, Premier League football contributed £7.6 billion to the UK economy. In the same season the Premier League and its clubs generated a total tax contribution of £3.6 billion to the UK Exchequer, £1.4 billion of which was accounted for by Premier League players. The League also supports 94,000 jobs in the UK, with 72 per cent of the League's economic activity generated outside of London.”
Club executives together at a shareholders meeting in central London were scathing about the report. “I would say this is an article written by someone who either doesn’t understand or doesn’t want to understand the business and industry,” said one.
“Agents categorically do work for clubs – signing a player is impossible if you don’t. HMRC themselves agree that agents can work for both sides in a transaction. There is an overarching narrative of this article which insinuates that clubs don’t pay tax. The reality is that Premier League clubs contribute £3.6 billion annually in tax, and players £1.4 billion.”