For two decades, the commercial architecture of English professional football rested on a quiet assumption: that a player's name and likeness could be separated from his labour, assigned to a company and rewarded at a lower rate of tax. That assumption is now being withdrawn by the courts, by HM Revenue and Customs and, from April 2028, by Parliament itself. The consequences extend well beyond the Premier League.
A Structure Built on Separation
English law recognises no freestanding statutory right of image or personality. An athlete's commercial persona is protected instead by passing off, registered trademarks, copyright in commissioned works and data protection law. In practice, an "image right" is a contractual bundle of intellectual property rights and because such a bundle is capable of assignment, HM Revenue and Customs (HMRC) historically accepted that it could be held by a company.
The Image Rights Company (IRC) was built on that premise. The player assigns his rights to a company, usually one he owns and directs and frequently incorporated in a jurisdiction such as the British Virgin Islands, Jersey or Guernsey. The club then signs two contracts: an employment contract governing playing services, taxed through PAYE and National Insurance in the ordinary way and a licence with the IRC permitting the club to exploit the player's image in merchandising, sponsorship and marketing.
The attraction was arithmetic. Payments to the IRC are corporate revenue, taxed at rates that have ranged from 19 to 25 per cent and profits may then be extracted as dividends, which attract no National Insurance. The additional rate of dividend tax is 39.35 per cent, against a combined marginal rate on employment income of up to 47 per cent (45 per cent income tax plus 2 per cent employee National Insurance). Retaining profits in the company also allowed income to be smoothed across a short career and drawn later at lower personal rates.
HMRC's response unfolded through four decisions, each of which narrowed the space in which the structure could lawfully operate.
Sports Club plc (2000). The first case concerned Arsenal and two of its signings, David Platt and Dennis Bergkamp, whose image rights were held by offshore companies. HMRC argued that the payments were disguised earnings taxable under Schedule E, the predecessor of today's employment income rules. The Special Commissioners disagreed. They accepted that elite players possess promotional identities separable from their playing duties and found the arrangements commercially genuine: negotiated at arm's length, supported by a defensible valuation and actively exploited by the club. The decision created a judicial safe harbour and, with it, two decades of widespread adoption.
PA Holdings (2011). In HMRC v PA Holdings Ltd the Court of Appeal considered annual bonuses routed through an employee benefit trust and a subsidiary issuing redeemable preference shares, so that staff received them as dividends. Moses LJ applied a purposive analysis of economic substance: the payments were remuneration for services and the label of "dividend" could not alter their character.
Rangers (2017). In RFC 2012 Plc v Advocate General for Scotland, the Supreme Court considered the employee benefit trusts used by Rangers Football Club, under which sums were paid to offshore trusts and advanced to players and executives as "loans" that were rarely recalled. The Court ruled unanimously for HMRC. Lord Hodge articulated the redirection principle: the charge to tax on earnings does not depend on the employee receiving the money personally and remuneration redirected at his behest to a trust, a relative or a company is taxable all the same.
Hull City and Geovanni (2019). Hull City AFC (Tigers) Ltd v HMRC applied these principles to the IRC itself. In July 2008, newly promoted Hull signed the Brazilian international Geovanni and agreed an image rights arrangement with Joniere Ltd, a British Virgin Islands company, at an annual fee of almost exactly 25 per cent of his salary. Unlike Arsenal in Sports Club, Hull could show no business plan, no independent valuation and no board level authorisation of any commercial strategy. The tribunal concluded that the payment was a device for meeting the player's net pay demands and taxable under PAYE. That finding did not require the contracts to be characterised as shams.
Part 7A of the Income Tax (Earnings and Pensions) Act 2003, introduced by the Finance Act 2011, separately addresses certain employment rewards provided through third parties. It contains statutory gateways and exclusions that must be applied to the facts. The PA Holdings and Rangers decisions support a substance focused analysis but
neither should be described as having simply been codified by Part 7A
and the Hull City case was not decided under it.
Part 7A was aimed chiefly at trusts and contractor loan schemes but its language posed a continuing risk to IRCs. Clubs therefore relied on an informal convention, the so called 20 per cent safe harbour, under which an IRC payment below one fifth of total remuneration was thought less likely to attract challenge. As wages rose, HMRC abandoned the heuristic: policing the line between genuine exploitation of intellectual property and disguised pay, case by case, had become administratively unsustainable.
The 2028 Reform
The Government's answer is to narrow the question rather than litigate it. At the Autumn Budget 2025 it announced that image rights payments related to an employment would be treated as employment income, taxed in the same way as wages. At the Autumn Budget on 28 October 2026 the Chancellor confirmed the measure and deferred its start by one year, from 6 April 2027 to 6 April 2028, to give clubs, players and advisers time to adjust. Legislation will be included in the Finance Bill 2026 27.
The design is deliberate. From April 2028, a payment related to a player's employment will be taxed as wages whatever the structure through which it is paid. A club may hold a pristine valuation, a global marketing plan and evidence of active exploitation but routing the payment through an image rights company should not be assumed to take it outside the measure. For those payments, the Sports Club line of authority ceases to matter. The Budget has not, however, set out a definitive test for separating employment related payments from others and the rates and treatment that will apply from April 2028 remain subject to confirmation in the legislation.
The following comparison summarises the change.
Metric | Before April 2028 (IRC model) | After April 2028 (statutory payroll) |
Primary tax vehicle | Corporation tax at the IRC | Income tax through PAYE |
Headline rate | 19 to 25 per cent corporation tax, plus dividend rates | Up to 45 per cent (additional rate) |
Employee National Insurance | Normally nil on genuine dividends | 2 per cent |
Employer National Insurance | Normally nil on genuine licensing fees | 15 per cent |
Burden of proof | Commercial substance must be shown | Employment related payments taxed as earnings, whatever the structure |
Independent third party deals | Corporate structure applies | Corporate structure applies, boundary yet to be defined |
The burden falls on both parties. For a player on additional rate earnings, the illustrative marginal charge is 45 per cent income tax plus 2 per cent employee National Insurance. The club may separately bear employer National Insurance at the current 15 per cent rate. These are different liabilities calculated on different bases and should not be added together as a single 60 or 62 per cent personal tax rate. Any comparison with the pre reform IRC model must include corporation tax, subsequent shareholder taxation, timing and the actual contractual terms.
The effect on negotiation is considerable. Where an elite contract is agreed on a guaranteed net basis, shifting employment linked image rights payments into payroll can increase the gross cost of delivering that promise. The Premier League's Squad Cost Ratio framework, effective from 2026/27, has an 85 per cent headline green threshold measured against defined football revenue and net profit or loss on player sales. A multi-year allowance of up to a further 30 percentage points initially creates additional headroom, with levies and sporting sanctions determined by the rules. It is not a declining 90, 85 and 80 per cent schedule. Greater payroll costs may therefore constrain decisions on squad composition, recruitment and contract renewals.
The reform does not abolish the IRC. It is directed at payments related to an employment, not at every payment for the commercial use of an athlete's identity, so genuinely independent endorsements, such as a global boot contract, a watch sponsorship or a luxury fashion ambassadorship, should remain outside it and may still be routed through a personal company. The boundary will nevertheless be policed and the legislation has yet to define it. Sponsors that also support the club, endorsements that depend on club intellectual property and sponsors connected with the club's owners are all likely to be tested as employment related.
Agents and the Dual Representation Problem
While the image rights reform addresses player remuneration, HMRC has separately tightened the treatment of agents' fees. Its Guidelines for Compliance 6 (GFC6), issued in May 2024 on football agents' fees and dual representation contracts, alters the compliance position on transfers.
In a typical transfer an agent acts for both player and buying club, which the Football Association's agent regulations permit with the written consent of all parties. The fee was customarily divided equally. The half attributed to the club was deductible, with recoverable VAT. The half attributed to the player, paid by the club to discharge the player's liability, was a taxable benefit in kind, reported on form P11D, with income tax for the player and Class 1A National Insurance for the club.
For more than a decade the equal split was treated as an industry convention. GFC6 rejects a default 50/50 allocation: the amount attributed to each party must follow the commercial reality, supported by contemporaneous evidence. HMRC generally considers that an agent representing an established player client provides most of the value to that player but it prescribes no universal alternative allocation. Clubs should retain engagement records, evidence of specific club services, negotiations, contemporaneous communications and appropriate invoicing. A tripartite agreement containing a standard 50/50 clause is not, on its own, sufficient proof, nor is it automatically disregarded without consideration of the facts.
The cost of failure may be substantial. Assuming that an entire £1 million agent's fee plus 20 per cent VAT is properly treated as a £1.2 million taxable player benefit, the illustrative income tax at 45 per cent is £540,000. At a 15 per cent Class 1A NIC rate the club's charge is £180,000, if all input VAT is irrecoverable, a further £200,000 arises. These sum to £920,000 of illustrative gross tax and VAT exposure, not necessarily an incremental assessment of that amount. Previously reported benefits, VAT already accounted for, valuation and the actual allocation must be considered when measuring any adjustment.
Recent football disciplinary proceedings offer a separate governance warning, although they must not be conflated with an HMRC finding on image rights taxation or GFC6. In March 2026 the Premier League announced sanctions against Chelsea FC, including fines totalling £10.75 million, following its review of historical breaches of its financial reporting, third party investment and youth development rules. In July 2026 the Football Association announced a separate £10 million fine after the club admitted 74 historical breaches of FA Rule E1.2, a two window registration ban was suspended. The club's current owners had self reported relevant historical matters. These regulatory cases illustrate the need for disclosure, reliable records and effective oversight, not a direct precedent on the tax allocation of agents' fees.
The Premier League draws on a global workforce and the general reform of residence based taxation affects it directly. The remittance basis was abolished with effect from 6 April 2025 and domicile has been removed as a concept from the tax system. For arriving athletes who have been non-resident for at least ten consecutive tax years, the Foreign Income and Gains regime offers a full exemption on foreign income and gains for the first four years of UK residence and permits those funds to be brought into the country without charge.
For a player with a genuinely international commercial profile, the FIG regime may offer relief on qualifying foreign income and gains during the first four tax years of UK residence, where the statutory conditions are met and a valid claim is made. An offshore IRC does not by itself make endorsement income foreign or eligible for relief. The nature and source of the payment, residence and applicable anti avoidance rules must be examined. Thereafter ordinary UK taxation of worldwide income and gains will generally apply. Long term residence can also bring non-UK assets within the inheritance tax regime, subject to the applicable residence tests and post departure tail.
Departure is not automatically a tax exit. Where the statutory conditions for temporary non-residence are met, certain gains and close company distributions arising during a period abroad may become chargeable on return to the UK. The relevant rules are not a universal tax charge on every transaction effected during a five year absence, they require analysis of prior residence, the length of absence, the type and timing of the receipt and any applicable exceptions. Offshore companies holding intellectual property must also be assessed under the particular economic substance, management and reporting rules of their jurisdiction. Regulatory sanctions vary: there is no general rule that an IRC lacking substance is automatically struck off.
Conclusion
The movement in UK sports taxation has been from interpretation to statute. Over twenty years, the tax treatment of a footballer's income depended on how persuasively a club could demonstrate commercial substance. That inquiry is being replaced by rules that do not depend on it. Employment related image rights payments will be taxed as earnings. Agent fees will be allocated on the evidence a club can produce, not on custom. Offshore arrangements will be tested against substance requirements and exchanged data.
The lesson extends beyond football. Corporate structures and cross border arrangements remain legitimate tools when they serve real commercial purposes and are operated with proper evidence. What is disappearing is the assumption that form, convention or the absence of immediate challenge is sufficient protection. Mural Crown's Sports Remuneration & Governance Health Check is designed to examine image rights agreements and valuations, marketing activity, agent engagements and allocation evidence, PAYE/NIC/VAT treatment, board approvals, offshore substance, residence and capital extraction plans. Its purpose is to identify material exposures, assemble the documentary record and prioritise remedial action before regulation or litigation dictates the timetable. For clubs, players, their families and advisers, the decisive asset will be governance that can survive examination.
This article is provided for general information and does not constitute legal or tax advice. Readers should seek professional advice on their own circumstances.
