Playing football in a tax free state might seem like the ideal scenario, but there are tax implications for UK players due to complex residency rules, warns RSM
No income tax is levied on footballers’ salaries in Saudi Arabia, compared to a combined rate of at least 47% of UK income tax and National Insurance contributions for those earning in excess of £125,140 per year in the UK.
This year for the first time the Saudi Pro League has been targeting many UK based players and a number have been attracted by high salaries and the opportunity to earn a windfall before retirement.
‘In addition to the taxes charged under the UK system, football clubs commonly pay agents’ fees on the players behalf’, said Adam Jefferies, associate director at RSM. ‘Although these payments are not made directly to the player, the cash equivalent of this is treated as a benefit, subject to tax of up to 45% on the player.
‘In Saudi Arabia, as there is no income tax, players will not suffer this charge. It could therefore be argued that agents play a role in the rising level of transfers to the Saudi Pro League as there is scope for them to charge higher fees free of tax.’
At face value from a tax perspective, the move from the UK to the Middle East appears ideal. However, for overseas income not to be taxed in the UK, set rules must be met for an individual to be considered non-UK resident for the tax year in question.
If they work full-time abroad, as these players would be, they can usually visit the UK for up to 90 days in a tax year, so long as no more than 30 were spent working, and retain non-UK tax residence status.
Where a player leaves the UK, but their family remains, this can, in some circumstances, also reduce the amount of days they can spend in the UK before becoming UK resident.
This provides an interesting dilemma for players returning to the UK to play for their national teams or in friendlies, for example.
For those that have left the UK during the summer transfer window, they are doing so part way through the 2023/24 tax year. Therefore, to be considered non-UK resident from the date that they left, they may be required to continue to work abroad for the following tax year, being the year to 5 April 2025.
Some players that either retire or return to the UK prior to 5 April 2025 therefore risk a portion of their overseas salary being taxable in the UK, which given the difference between income tax rates, would have a significant impact. Therefore, the potential plan to have a year playing in Saudi to take advantage of the low tax regime could lead to unexpected UK tax liabilities arising.
About the authors
Adam Jefferies, associate director, Michael Anon-Calvo and Callum Littlefield, private client tax manager, RSM