In the year ending March 2024, HMRC opened investigations into 20 football clubs, 83 football players and 21 football agents.
The taxman’s scrutiny of English football is far from new, but pressure on the professional game is intensifying as the government considers sweeping new powers.
The government has launched a consultation on proposals to introduce a criminal offence for making “reckless untrue statements” in respect of direct taxes.
Similar legislation already exists for indirect taxes such as VAT, but its extension to direct taxes carries particular risks for footballers and their advisers.
Under FIFA and FA rules, agents regularly act for both the player and a club on a transfer or contract renegotiation to get a deal over the line.
Agents typically split their fee between services provided to the club and player, and as the club usually pays the fee, the player element is taxed on the player as a benefit in kind.
HMRC regularly challenges the split of the total fee between club and player services, arguing a greater proportion of the fee should be taxed on the player.
A core dispute centres on whether the split should reflect the quantity of work undertaken for each party, or the quality of the benefit each party received from the agent’s services.
These are aspects that can be hard to decipher in the often chaotic and last-minute world of football transactions, according to Alistair Culverwell, head of tax dispute resolution at Forvis Mazars.
HMRC’s latest guidance, updated in May 2024, focused primarily on the records clubs and agents should retain and did not address the underlying uncertainty over how fee splits should be determined.
The proposal to introduce a criminal offence for making “recklessly untrue statements or declarations” raises the stakes considerably for everyone involved in football transfers.
The definition of “statement” is potentially wide, including oral statements, and recklessness, defined in the same way it is for other criminal offences, is by its nature subjective.
Players subject to investigation by HMRC may not be party to all of the facts they are being asked to answer to, having not been present for all stages of negotiations.
Even if individuals are not ultimately charged, a criminal investigation can have a hugely detrimental effect on an individual’s personal and professional life.
The potential new powers could bring the UK into closer alignment with Spain, a country which has criminally investigated and prosecuted a number of high-profile individuals including footballers.
Culverwell argues that an easier and more elegant solution would be early and upfront engagement between HMRC, players, clubs, agents and their advisers before tax returns are filed.
Such an approach would allow parties to present the economics of the deal to HMRC in advance, agree on a logical fee split and sign it off, removing costly uncertainty for all involved.