HMRC has clarified the position on footballer agent fees through the issuance of guidance on dual representation contracts. Such contracts are used during transfer negotiations, and state that the agent is acting on behalf of both the player and the club with which they are signing. The agents’ fees payable are, therefore, split between the player and the club, resulting in the total tax liability suffered by each party being reduced. Because of this, such contracts, as well as the football industry as a whole, have faced increasing scrutiny from HMRC, and the publishing of guidance on this matter is the latest step in a string of recent developments.
Although many dual representation contracts purport to split the duties performed by the agent equally between the player and the club, HMRC has explicitly rejected that such a split is the default position. The fee structure must instead reflect the ‘commercial reality’ of the duties and services provided by the agent to each party. HMRC has stated that, in most instances, the agent will be acting wholly in the best interests of the club or the player, and the onus will be on the taxpayer to provide evidence to the contrary demonstrating the true nature of the relationship.
The evidentiary burden imposed on the taxpayer can be high, and will include details of both the contractual responsibilities which were outlined prior to the agent providing their services, and correspondence which demonstrates that these responsibilities were carried out.
These guidelines follow the recent decision of the First Tier Tribunal in the case of Oumar Niasse on whether agents’ fees are allowable as an expense of a football player’s employment. Here, it was held that such fees did not meet the test of being wholly, exclusively, and necessarily for the performance of a footballer’s employment duties (namely, playing football), nor was Niasse obliged to engage an agent for negotiations under his employment contract with Everton Football Club. Although there is legislation which specifically permits the deduction of agents’ fees as an expense of employment for entertainers, the FTT also found that such rules did not apply as a footballer did not fall within the definition of performer and, therefore, the case was dismissed.
It is important that agents, clubs, and players alike familiarise themselves with these changes and that they understand the risks such changes may pose to their tax affairs.
HMRC has clarified the position on footballer agent fees through the issuance of guidance on dual representation contracts. Such contracts are used during transfer negotiations, and state that the agent is acting on behalf of both the player and the club with which they are signing. The agents’ fees payable are, therefore, split between the player and the club, resulting in the total tax liability suffered by each party being reduced. Because of this, such contracts, as well as the football industry as a whole, have faced increasing scrutiny from HMRC, and the publishing of guidance on this matter is the latest step in a string of recent developments.
Although many dual representation contracts purport to split the duties performed by the agent equally between the player and the club, HMRC has explicitly rejected that such a split is the default position. The fee structure must instead reflect the ‘commercial reality’ of the duties and services provided by the agent to each party. HMRC has stated that, in most instances, the agent will be acting wholly in the best interests of the club or the player, and the onus will be on the taxpayer to provide evidence to the contrary demonstrating the true nature of the relationship.
The evidentiary burden imposed on the taxpayer can be high, and will include details of both the contractual responsibilities which were outlined prior to the agent providing their services, and correspondence which demonstrates that these responsibilities were carried out.
These guidelines follow the recent decision of the First Tier Tribunal in the case of Oumar Niasse on whether agents’ fees are allowable as an expense of a football player’s employment. Here, it was held that such fees did not meet the test of being wholly, exclusively, and necessarily for the performance of a footballer’s employment duties (namely, playing football), nor was Niasse obliged to engage an agent for negotiations under his employment contract with Everton Football Club. Although there is legislation which specifically permits the deduction of agents’ fees as an expense of employment for entertainers, the FTT also found that such rules did not apply as a footballer did not fall within the definition of performer and, therefore, the case was dismissed.
It is important that agents, clubs, and players alike familiarise themselves with these changes and that they understand the risks such changes may pose to their tax affairs.
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Tax investigations and dispute resolution
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28 March 2023
