HMRC to probe England players on image rights

Leading England internationals are believed to be at the centre of an investigation by tax officials into Premiership clubs’ payments to image rights companies.

The investigation is noted at the foot of Saracens’ annual accounts filed to Companies House, which says: “In line with other Premiership rugby clubs, Saracens has received a ‘Check of Employer Scheme Records’ notice from HMRC.”

Her Majesty’s Revenue and Customs has already launched a major crackdown on the abuse of payments to image rights companies in English football. Image rights companies are a tax-efficient vehicle through which an athlete can monetise their brand – ie their likeness, voice or signature – through sponsorship or endorsement deals.

Payments to image rights companies are subject to corporation tax at 19 per cent, as against the 46 per cent top rate of income tax to which standard salary is subject.

While this is above board, HMRC has been clamping down on excessive image rights payments by Premier League clubs as a means of tax evasion. Now it is turning its attention to rugby.

According to one top agent, only around 10 per cent of rugby players in the Premiership have an image rights company. Nigel Wray’s investment in Maro Itoje’s image rights company was at the heart of Saracens’ salary-cap scandal.

Several figures in English club rugby told The Daily Telegraph they were confident there was nothing wrong in their arrangements with image rights companies. However, Waqar Shah, a senior lawyer specialising in tax at Mishcon de Reya, says HMRC is likely to apply significant pressure to rugby clubs after its successful pursuit of footballers.

Shah said HMRC “are keen to avoid any form of disguised remuneration”, adding: “One of the big drivers in the Budget is HMRC being much stronger on enforcement and collection of taxes. It is no surprise they are looking at rugby because they have a template for how they did it in football clubs. They even had the stats to hand at the House of Commons Public Accounts Committee in 2016 to say over the prior two years they had accounted for over £150million in relation to image rights and related issues. Since then, HMRC have confirmed accounting for tens of millions of pounds in this area. A good return on the investment.

“The way HMRC have done this in the past is that you go after a couple of names in the industry and hit them hard. Lo and behold, all the others in that industry start making disclosures to HMRC.”

The other part of the investigation centres on payments to agents. The majority of Premiership clubs split the cost of an agent’s commission 50-50 with the player. In football, HMRC has argued the player should be liable for a greater proportion and be taxed accordingly.

HMRC’S investigation could have implications for Premiership Rugby’s salary cap, particularly if the image rights payments are deemed to be salary. However, one director said they believed there were no parallels with the Saracens scandal.

“Using image rights companies is perfectly legitimate and should be encouraged for certain players,” the director said.