On 13 May 2024, HMRC published new guidelines for professional football clubs and agents with regard to their UK tax obligations on agents fees. These are to complement the new FA Football Agent Regulations which came into effect on 1 January 2024.
Agents play a significant role in the professional football landscape; their role is crucial in helping a player (and a club) move to a new club or negotiate a better contract with an existing club. Although an agent’s role is primarily to act in the best interest of their player, there are instances when the agent can represent both the player and the club, for example in contract negotiations.
The club will typically pay a fee to the agent for such ‘dual representation’. As some of the agent’s services relate to their acting on behalf of the club, it is necessary to apportion the fee between player services and club services. This is a critical exercise as it will determine much of the tax treatment of the payment: for example, the proportion of VAT the club can recover on the club services, and the taxable benefit enjoyed by the player in respect of the player services (and the accompanying employer national insurance contributions).
HMRC has long accepted the principle of dual representation where both the player and the club accept this. Their recent guidance issued in May 2024, reiterates their views on some key points, however:
The new guidance emphasises the obligation on clubs, players and agents to keep detailed records to evidence the proposed justification of agent payment allocations. A non-exhaustive list of relevant documents includes the player representation agreement, written communications relating to negotiation, permissions to speak to an agent or a player and the club’s request for an agreement to being dually represented. Invoices should be sent to both the player and the club and all parties should be clear and consistent as to the allocation of the agent’s services and fees.
HMRC also comment on the need for clubs to have clarity as to who they are paying – a payment to an agent who then distributes sums to other ‘shadow’ agents is likely to increase the risk of an HMRC compliance check. Clubs whose players are out on loan have the ultimate responsibility to ensure the correct tax and reporting requirements are followed. In particular, where family members act as agents (a notable example being Charlie Kane, brother of England captain Harry Kane) or intermediaries, care should be taken to ascertain if the payment to the agent is genuinely in respect of dual representation or is really an inducement for the player’s benefit (in which case it would be taxable employment income of the player).
The new guidelines are of limited assistance to clubs, agents and players as they are not specific as to what exact services would be expected to be provided by an agent to a club, as opposed to a player. In particular, HMRC’s assertion that the majority of services under a dual representation arrangement will be regarded as applicable to the player may not always be accurate. Some agents have a significant influence in the transfer market and will work with particular clubs often: Jorge Mendes for example has traditionally had a strong relationship with the owners of Wolverhampton Wanderers FC and around 20 of his player clients (and at least one manager), the majority of whom are Portuguese, have signed for Wolves since around 2016.
Similarly, given how important a particular signing can be (for example a striker whose goals can stave off the financial oblivion of relegation, or a foreign player whose signing can open up lucrative commercial avenues in another country, such as the Far East), the role of the agent, and the importance to the club of ‘winning them over’, is critical. Therefore, the contention that agent fees paid in respect of player transfers should automatically be regarded as primarily applicable to an agent’s work for players, as opposed to the buying club, is not necessarily accurate.
The new guidance notes that often a player’s employment contract may be signed on the same day as a player representation agreement. Where this happens, HMRC consider this as an indicator that dual representation or any values attributed to player and club services may not reflect the commercial reality. Such a position does not take account of the rapidly moving transfer landscape where player transfers can happen quickly and be documented after oral negotiation. This is more acute on or around external deadline dates such as the Summer and Winter transfer windows and 30 June, when Premier League clubs must submit accounts to comply with Profit and Sustainability Rules.
Nevertheless, clubs need to continue to monitor their activity in this area and review agent contracts and dual representation arrangements so that they can minimise the risk of a compliance check. The new guidelines are a reminder of the ongoing compliance obligation and should be considered in tandem with other general tax guidance regarding use of intermediaries and employment and other relevant taxes.
This article is for information purposes only and is not a substitute for tax or legal advice, and should not be relied upon as such. Please contact Anthony Reeves or Cathy Bryant if you have any queries on the above or corporate tax issues generally.
