Changes to the rules relating to payments to football agents

2nd June 2021

HM Revenue and Customs (HMRC) has released formal guidance on how it will treat payments made to football agents who provide services to both a club and the club’s player – often referred to as “dual representation”.

Typically, as well as paying the football agent for services provided to the club itself, the club will also pay the football agent for the services provided to the player on the player’s behalf.  The portion paid on behalf of the player is taxable as a benefit-in-kind to the player, which the player must disclose on their P11D form.

Previous position

• Previously, where a football agent was providing services to both the club and the player, and the club was paying for all the football agent’s services, HMRC was content to accept the “fiction” that the services were split 50:50 between services provided to the club and services provided to the player.
• As a result, dual representation contracts often provide that 50% of the football agent’s fees are paid on behalf of the player, for services provided to the player.

New guidance

• The new guidance reflects HMRC’s trend towards further scrutiny of tax arrangements between football clubs and their players.
• Clubs must now actually determine the relative proportions of services provided to the club and to the player, and payments made by the club to the football agent should mirror those proportions. In other words, it is no longer be permissible to simply treat half the football agent’s services as club services and the other half as services to the player.
• Relatedly, clubs must be able to evidence that their contractual arrangements reflect the reality of the situation. For example, where the club agrees that it will pay 65% of the football agent’s total fee in consideration of services provided to the player, HMRC must be satisfied that 65% of the football agent’s services provided to both the club and the player are actually being provided to the player.

Other key provisions in the new guidance

• The guidance also requires clubs to be alert to the risk of payments they make to a football agent being transferred to the player or the player’s connected parties (such as family members).
• Where a club becomes aware of such arrangements, it should promptly calculate and report the tax properly payable to HMRC.
• HMRC expects clubs to ensure compliance with anti-money laundering requirements, specifically referencing payments to overseas individuals or entities.

Consequences of non-compliance

• HMRC may investigate clubs, players and/or football agents, which could result in the recovery of large amounts of tax (including interest) properly due to HMRC.
• HMRC may also impose civil penalties and sanctions and, in particularly egregious circumstances, criminal sanctions.

Practical advice

• Where a club agrees to pay an agent certain sums in respect of services provided to the club and to the player, it should retain a full audit trail which demonstrates, in particular:
  • the reasons for and evidence of engaging the football agent, and instructions given to the football agent in respect of the services they are to provide
  • contemporaneous evidence showing why the particular club/player services split was deemed appropriate
  • evidence of the work which the football agent has actually performed for the club.
• Appropriate evidence may include letters, telephone notes, meeting notes, emails and memos.
• Conduct a review of the club’s policies and procedures in respect of anti-money laundering and tax evasion.