Top 10 Tax Issues For Players –
PKF Francis Clark
P11Ds, agent fees, relocation, new contracts, tax returns, image rights, poor financial advice, RPA partner PKF Francis Clark highlight the top ten tax issues for players so you don’t fall foul of them.
1 – High risk investments
Many of you will have seen the latest press and know of sports men and women alike who have invested in high risk ventures, only to lose their money or have the validity of the scheme challenged by HMRC resulting in the player repaying thousands of pounds in later life. Many even go bankrupt.
Ensure that when someone provides financial advice that they are qualified and don’t just follow the crowd!
2 – An unexpected tax bill as a result of your agent fee?
Where the club pays an amount on a player’s behalf this is listed on a form P11D which is given to the player by the start of July. Ultimately you’ll pay tax on the agent fee disclosed to HMRC.
If you complete a Self-Assessment tax return, this will need to be included. If not, your PAYE tax code will change and you’ll pay any tax due through your wages.
An agent’s fee will be set out in your contract – take the total amount paid by the club for acting on your behalf and add on the VAT (20%). You will pay tax on this as if it was income in your hands at the end of the tax year.
Get tax advice on the implications of such items in your contract.
3 – Not knowing when to register to complete a Self-Assessment return? How do you register to make a Self-Assessment tax return and when do you need to complete it?
When your wages and P11D benefits increase to over £150,000, you have other income or you/your partner living with you is claiming Child Benefit (at a time when your wages are over £50,000) you will need to register to complete a Self-Assessment Return.
This must be submitted (together with any tax paid) by 31 January following the 5 April end of the tax year.
You can register to complete these online, at this point it would be wise to speak to a tax advisor to guide and assist you with the submission process.
4 – A tax bill going back over several tax years for an exaggerated ‘tax back’ claim.
Every employee is eligible to claim tax back from HM Revenue & Customs where they incur certain expenses relating to their employment such as purchasing boots or travelling to meet points for away fixtures.
A claim for this is made on your Self-Assessment tax return or via a simple form. It ultimately depends on your circumstances. For each of our clients we discuss with them what they can claim and complete the claim process for them. Every claim is different. Where appropriate the player gets back a refund of tax at the rate they paid in the year in question.
The key is to know what you are claiming for and ensure that you are happy with what your advisor is claiming.
We hear stories of players having had tax relief claims completed by non-qualified entities who take a percentage of the expected refund. If HM Revenue & Customs enquire into a tax relief claim, it is the player who needs to provide evidence of what they are claiming for, including receipts where appropriate. If the Inspector of Taxes disagrees with your figures they can then assess to tax claims made in prior years. You will have to repay any refund received in error, together with interest and potentially penalties.
Make sure you know what is being claimed for you and that you agree the figures before the claim is made. It is you that HMRC come after where claims made are wrong!
You can claim your tax back for the last four years but make sure you get the right advice which isn’t always the one that generates the most refund!
5 – Overseas players bringing money into the UK
It is crucial when a player comes to the UK that they speak to a tax advisor. Many are unaware of the tax implications of how they bring money into the UK or how things work from a UK tax perspective.
This is an area where we believe players need our assistance early. If you or your family have any questions please feel free to pick up the phone or ask when we visit the club.
6 – Image rights incorrectly set up or not getting the right advice and paying more tax/fees to have the company than you would if you didn’t have one!
‘Image rights’ is a term often used lightly but it isn’t a concept recognized in UK law. Many will know of other players who have these companies and ask why they do not.
In practice you need a substantial profile and the ability to exploit a business surrounding your image. Are you a Marcus Rashford or Cristiano Ronaldo of the rugby world?
Consideration should be given as to what you want to do with money the company earns. If you need to extract the bulk of company profits for personal spending you might actually be better off receiving image rights payments personally once combined corporation tax and income tax and the required compliance fees are taken into account.
Just because a team mate has a company for image rights payments this does not mean it is right for you! Contact us to discuss your circumstances.
7 – A tax bill as a result of spending your ‘£8,000 relocation’ on non-qualifying items
A relocation payment can be made by the club to a player completely tax free. This can be up to £8,000. However, whether relocation payments can be made tax free depends on what expenses are incurred and whether there has been a genuine ‘relocation.’ Any amount spent on ‘non qualifying expenditure’ will appear on your P11D and be taxed on you, for instance if you use the payment solely on renting with no intention of moving your main residence.
This area is complex so please contact us for an informal chat.
8 – Testimonial year – is the first £100,000 made really ‘tax free’
The rules surrounding testimonials changed a couple of years ago. The first £100,000 can be paid tax-free, but can it? You won’t be surprised to hear that it all depends!
We have extensive experience in this area and are able to provide guidance on the set up, running and ultimate wrapping up of these structures. If you would like to chat through any of this, please don’t hesitate to contact us.
9 – Non-disclosure of rental property
Many players will rent out their property when they move clubs but aren’t sure how or when to report the income to H M Revenue & Customs. We have helped many players who have rental property they have not previously disclosed to the Inspector of Taxes.
Voluntarily disclosing your rental property to HMRC will minimize penalties; if the Inspector makes his own enquiries the penalty levied can be up to 100% of the tax you have to pay.
If your property income is under £1,000 for the tax year then you do not have to do anything. If your property income is higher it needs to be declared.
10 – Poor advice setting up a business
Those with an entrepreneurial spirit are often held back through a lack of support. Setting up a business can seem like a minefield but it needn’t be. We are able to guide you through the process and assist you with business structuring, record keeping and financing as well as being on hand to answer any questions that you have along the way.
There are various ways to start a business, whether that is a sole trade, partnership or even a company structure.
The way that you start things off is crucial and can save you thousands of pounds in the long run. Get the right advice and speak to a tax advisor when you first have the idea.