Premier League are the focus of a report relating to millions of pounds worth of tax being avoided through the dual representation of player agents during transfer negotiations.
Analysis by Tax Policy Associates, and published by the BBC as part of a Newsnight investigation, claimed that as much as £250m in tax had been avoided by Premier League clubs over a three-year period, where agents are paid for acting on behalf of both club and player in a deal.
The analysis, which looked at the dealings of all Premier League clubs but highlighted the clubs the biggest beneficiaries only, stated that the use of dual representation reduced the amount of tax paid on agent payments due to the agent payments being split between both parties, meaning that half of the payment avoids tax.
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The think tank estimated the practice to be worth potentially tens of millions of pounds a year, with Manchester City, Manchester United, Arsenal and Chelsea the clubs identified as benefiting the most from the process.
In 2021, Tax Policy Associates estimates Manchester City saved £10.9m in tax, followed by Manchester United with £10m and Liverpool with £8.1m. In 2020, the largest beneficiary was Chelsea, saving £12.8m.
Estimates provided in the analysis suggested that the practice may have saved players, their agents and their acquiring clubs £81m in 2019, £91m in 2020 and £81m in 2021.
According to the analysis, if the agent's fee is picked up solely by the player, it says HMRC can expect to receive around 60 per cent of the total payment in tax, although that falls to around 30 per cent if the fee is split between the player and the club using dual representation.
FA data published in 2021 revealed around 68 per cent of Premier League player deals were done through dual representation. It is a method that is permitted provided all parties give written consent, with 2021 guidance provided by HMRC requiring that clubs keep evidence that agents are legitimately working for both sides.
The analysis used the assumption of a 50:50 split between player and agent, something sources have told the ECHO presents a flaw in the findings.
Whilst both player and agent benefit in the signing of a player for a club, so too does the club itself. A major part of the club’s paying millions in agents fees is to be able to land top talent at the elite level, something that can have a future benefit through player trading etc.
While a 50:50 split used to be the case previously, it is no longer an accepted position by HMRC. A commercial justification for the arrangement must now be presented in order for it to be accepted by HMRC.
One tax expert the ECHO spoke to explained that while a player and agent may have an agreement before they arrive at a football club for the guaranteed income of the player, a fee will be agreed with the agent, often at a slightly higher percentage.
The tendency is then for the fee agreed between player and agent to be treated as player services, with anything over and above that treated as club services.
The report suggested a number of Premier League were currently ‘under investigation’ regarding the issue. Premier League clubs, especially the largest who have revenues of over £200m, are audited on a near annual basis and have dedicated compliance managers at HMRC. As part of the auditing process clubs must provide detailed information on a number of transactions involving players and agents.
Clubs would argue that the value in signing players or extending contracts arrives through player trading, where significant tax arrives during a player sale.
A Premier League spokesperson told BBC Newsnight: "We believe that the overall figure suggested here is based on assumptions that do not recognise the individual circumstances of each transaction.
"During the 2019/2020 season Premier League football contributed £7.6bn to the UK economy. In the same season the Premier League and its clubs generated a total tax contribution of £3.6bn to the UK Exchequer, £1.4bn of which was accounted for by Premier League players."
An HMRC spokesperson added: "Dual representation cannot be assumed to be a tax avoidance scheme; its use can be tax compliant.
"However, we carefully scrutinise arrangements between clubs and employees, and we work closely with the football industry to educate and deal with tax risk head on.
"Our actions and the money bought in from this industry speak for themselves. Since 2015, from across all tax areas in the football industry, we've recovered £573m that would otherwise have gone unpaid."
Both Everton and Liverpool were approached for comment.
The BBC and Tax Policy Associates said that individual Premier League clubs each declined to comment on the analysis.
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