Football clubs score tax windfall for HMRC
10 May 2019
With four English football teams set to meet in the Champions League and Europa League finals, the first time one country has dominated the competitions, HMRC is set to take a multimillion pound share of prize money and player bonuses
10 May 2019
This is the first time one country has dominated the European football cups with four Premier league clubs taking all four places at the finals. Liverpool and Spurs head to Madrid for the Champions League final on 1 June while Chelsea and Arsenal will be in Baku in Azerbaijan for the Europa League on 29 May, for matches which will generate millions in prize money.
This will create a windfall for the taxman, with HMRC looking to get its share of the lucrative prize money. Players bonuses alone will be taxed at 47%, assuming straight PAYE deductions, while corporation tax will be due on an estimated £1.14m for the two winning clubs, according to accounting and tax advisory firm Blick Rothenberg.
By the end of the season European games will have generated approximately £210m in revenue, as well as additional sponsorship income.
The group stages of the two tournaments featured six Premier League clubs, with Manchester City knocked out in the quarter finals by Spurs while Manchester United lost to Barcelona in the semi finals of the Champions League.
HMRC will be a winner regardless of the final result, with the knock-on revenue kick from corporation tax from club earnings.
Mark Levitt, partner at accountants Blick Rothenberg said: ‘The additional prize money received by the clubs will form part of their annual turnover. Any resulting profit is liable to UK corporation tax; this is obviously a potential boost to HMRC, with 18 out of 20 clubs generating profits in the year 2016/17.
‘With four English teams in the two European finals, HMRC is already eyeing up the corporation tax on the winners’ bonuses for the two victors (a potential total of £1.14m based on £6m at 19%). Liverpool and Tottenham paid a combined £45m in corporation tax to HMRC in 2018, according to the respective company accounts to 31 May 2018 and 30 June 2018.’
While the clubs will be paying corporation tax on the profits, the players also share in the tax burden.
Paul Haywood-Schiefer, a manager at Blick Rothenberg, said: ‘Top players’ contracts are littered with bonuses based on performances, for goals, appearances, league positions and of course cup-runs. While the players will benefit from the progression to the final, those players’ bonuses will be taxed through PAYE by the club. This means that after accounting for the tax due and the NICs, the players will see 47% of any bonus passed direct to HMRC”.
‘There is also the employers’ NIC burden on the bonuses, as the clubs also have to pay 13.8% employers’ NICs on the value of these to HMRC.’
‘The bonuses paid out will reduce the corporation tax income for HMRC; however, the increased PAYE tax and NIC will be the guaranteed win for them – whatever the results on 29 May and 1 June.’