Britain’s top tax inspector has called on the chancellor, Philip Hammond, to review the tax rules for super-rich football stars who are avoiding tax by siphoning earnings from Premier League games into image rights companies based in offshore tax havens.
Jon Thompson, chief executive of HMRC, told a committee of MPs that offshore image rights payments were now “the most significant risk in football”.
He said the problem was more serious among footballers than controversial film partnership schemes – well known for attracting investments from top players, as well as wealthy celebrities and bankers.
Giving evidence to MPs alongside Thompson, HMRC’s director general of enforcement Jennie Granger said there were currently 43 players, eight agents and 12 clubs subject to ongoing inquiries in relation to payments for use of their image rights.
Giving evidence to parliament’s public accounts committee, Thompson told MPs that as a football fan – he is a Norwich City supporter – he could see that the tax rules for image rights payments, particularly as they applied to non-domiciled foreign players, appeared unfair.
“I think if it was me, I would want to review this,” he said, adding that the topic “would certainly be on my list of priorities [when thinking of] policies to talk about [with ministers]”.
Last week, a European consortium of media, including Germany’s Der Spiegel and the Sunday Times, published leaked details of image rights arrangements for Manchester United manager Jose Mourinho. His agent has stressed that the structure does not involve tax evasion and is “fully compliant with [his] tax obligations”.
Thompson said HMRC already has in place a well-established process for scrutinising image rights payments made to players and coaches at top clubs in the UK. He said “the vast majority” of clubs were very open with inspectors about how they calculated such payments – though a minority were less forthcoming.
Foreign players at top clubs are best placed to exploit the tax avoidance opportunities available through image rights payments. This is because they can qualify for the UK’s special “non-domicile” tax status – meaning image rights income channeled offshore does not have to be declared to HMRC.
Tax bosses were giving evidence to MPs after the National Audit Office last month published a detailed assessment of how thorough tax inspectors deal with the super-rich.
Several MPs questioned why tax inspectors assigned to super-rich tax payers were known as “customer relationship managers”, and why, in some cases, wealthy individuals received only “suspended fines” rather than hard financial penalties.
Thompson said of the CRM label: “It is not a matter of tremendous significance … We’ve had a debate about it – it sounds more friendly than it is.”
He also defended the practice of suspended fines, insisting these were a cost-effective means of encouraging wealthy taxpayers into less aggressive behaviour.
The HMRC boss said revelations from the Panama Papers continue to prove useful to tax investigators pursuing criminal investigations, and had recently led to some arrests. The arrests related to individuals who had sought to hide their true ownership of UK property.
Thompson told MPs that, as of March, HMRC had ongoing probes into Britain’s super-rich – defined as those with assets of £20m or greater – relating to £1.9bn of potential tax. Of that sum, just over £1bn relates to film partnerships and other aggressively structured tax schemes.
There are about 3,000 such schemes still in operation, creating disputed tax liabilities of £14bn. Thompson said the most prolific investor in these schemes had 68 such investments.