Amid the ongoing overhaul of regulations affecting football agents, HMRC have provided further clarification on its position concerning the payment of football agent fees.
Football agents are remunerated depending on the services that they provide, and to whom, but by and large, there are three standard services that attract a fee (Service Fee):
- Player Services – a payment made directly by the football player (Player) to the football agent (Agent) in consideration for services the Agent has provided to the Player;
- Club Services – a payment made directly by the football club (Club) to the Agent in consideration for the services that the Agent has provided to the Club; and
- Dual-Representation – a payment made by the Club for the services provided by the Agent to the Club and the Club pays the Agent on behalf of the Player (effectively, both 1 and 2, but the Club is paying both).
The Agent is generally working in the interest of Player to place them with (or retain them at) their preferred Club, and, in doing so, secure the Player the best employment terms. In practice, the Club almost always pays the Service Fees on behalf of the Player, even where there are no services performed by the Agent to the Club. This is currently permitted both under the FA rules and by HMRC, provided that the Club recognises this as benefit in kind, formally known as P11D, in favour of the Player. This could soon change subject to the new FIFA Football Agent Regulations, that are currently part suspended, which will require the Player to directly pay the Agent in quarterly instalments.
HMRC have taken issue with Dual-Representation Agreements whereby the fees paid to the Agent are split as 50% of the total Service Fee being regarded as Player Services, and 50% of the total Service Fee being apportioned to Club Services.
HMRC’s position:
HMRC have a keen interest in how the Service Fee is split in a Dual Representation Agreement. This is because the allocation of the Service Fee between Player and Club Services can have a significant impact on the Player’s liability to income tax, National Insurance contributions, the Club’s VAT liability and entitlement to reclaim VAT.
Effectively, the more weight given to Club Services within the Dual Representation Agreements, the less income tax and National Insurance contributions the Player must make (through P11D) and the higher the VAT the Club is able to reclaim.
Dual Representation Agreements
HMRC guidance states that “the split of payment value of the Agent Fee[s] between Player Services and the Club Services must represent the commercial reality of the services provided”. The default position cannot be a 50/50 split.
Proving which way the Service Fee is apportioned must be considered by an Agent when negotiating future transactions to avoid inviting any unnecessary investigation by HMRC.
Genuine Dual Representation Agreements – how should the services be evidenced?
HMRC have provided the following criteria that could be used to evidence the relationship between Player, Club, and Agent, and therefore show why the Service Fee is split 50/50, or in fact further one side than the other.
They include evidence relating to:
- the Player-Agent representation agreement;
- permission given by the Club holding the Player’s registration to the potential buying Club to approach the Player and their Agent, when the potential buying Club wishes to recruit that player
- the potential buying Club’s initial approach to the Player and the Player’s Agent, including any terms offered to the Player and Agent
- the Club’s request for:
- the Agent to provide the Club with services
- the specific services the Club requires the Agent to provide to the Club
- the amount the Club would be content to pay to the Agent in return for those services
- the Agent’s agreement to enter into a dual representation contract, including the types of services to be provided, the initial terms on which any such agreement was negotiated, and the final terms agreed — this information should also make clear the valuation that the Agent itself placed on its services to the Player and Club respectively;
- the Player’s agreement to enter into a dual representation contract;
- the dual representation contract between Agent, Player and Club;
- the Player’s agreement to enter into an employment contract with the Club, including initial terms on which any such agreement was negotiated, as well as the final terms agreed
HMRC have further indicated that where Dual Representation documents are dated on the same date as the Player’s employment contract is entered into, it is likely that the apportionment of the Service Fee between Player Services and Club Services may not reflect the commercial reality.
Players on loan
There can often be significant confusion between the Clubs when a Player is on loan. Neither the parent Club nor the loanee Club will want to incur further costs regarding the Service Fees of the Player. It is often omitted from negotiations as to who is responsible for any employment reporting obligations concerning the benefit received by the Player (due to the Service Fee being paid on behalf of the Player), and, therefore, the applicable P11D requirements.
HMRC states that the ultimate responsibility falls on the parent Club to report this through its normal payroll procedures.
You can access the full guidance published by HMRC here.
Navigating the complexities and scrutiny of any transfer can leave the Agent seeking reassurances from external legal support, let alone the additional burdens now imposed by HMRC. The sports law team at Blaser Mills Law are here to guide you through every step of the transaction, or simply with a view to advising on the HMRC regulations. Contact a member of the team for an initial discussion on your transaction.
This article is not intended to constitute legal advice and you should not take, or refrain from taking, any action based on the information which it contains. Always seek the services of a professional legal adviser.
Get in touch with us today on 020 3814 2020 or email enquiries@blasermills.co.uk.
