Premier League nears settlement with HMRC over 'Image Rights' payments
Thu 20th Jan 2011 | Money & Finance
The Premier League and U.K. authorities are moving closer to an agreement that will require clubs to pay millions of pounds to the government and curb teams’ attempts to reduce players’ tax bills, according to Bloomberg.
Players are thought to get much of their salaries for so-called “image rights” from the use of videos and photographs in advertisements and merchandise sales. Those payments are made to players’ companies, allowing them to escape the 50 percent tax rate for high earners, and sometimes to pay nothing. Her Majesty’s Revenue and Customs (HMRC) argues that most players aren’t well-known enough to benefit from image rights.
According to sources, the amount owed to the government will be based on clubs’ revenue, with the highest-grossing teams such as Manchester United and Chelsea repaying a lower percentage of the taxes owed because the teams are better known globally.
“HMRC are well aware of attempts to use image rights as well as other schemes to avoid the 50 percent rate of tax,” the agency said yesterday in a statement.
“The taxation of image rights is a complex area where the tax treatment will very much depend on the facts of the particular case.”
The Sunday Times revealed how HMRC is negotiating the payment of £100 million from Premier League teams in back taxes. It’s understood that Arsenal has already come to an agreement with tax officials.
Premier League spokesman Nick Noble declined to comment on when negotiations started on the proposals, which will require clubs to repay six year’s worth of backdated tax.
United, Liverpool and Arsenal have benefited from their global reach to sign multimillion pound commercial agreements, and their players would be justified in having a larger proportion of their income paid as image rights, the people said.
“What it does is draw a line in the sand,” said Philip Long, a partner and soccer finance expert at accounting firm PKF. “It’s a pragmatic and commercial solution to what has been a running sore.”
The agreement follows the collapse of talks between the league and tax officials over a separate formula, which would have used a system that rated players by their marketability. Those with the highest rating would have been entitled to receive the most money for their image.
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