When the dust settles on the past week of European football, another victor has emerged, and it isn't football... it's Her Majesty's Revenue & Customs ("HMRC").
Liverpool and Tottenham Hotspurs' progress to the Champions' League final has gripped the nation, and whilst they may be not quite hitting the same heights, Chelsea and Arsenal have made their way to the final of the Europa League.
The four Premier League clubs' participation in the Champions League (Liverpool/Tottenham Hotspur/Manchester United/Manchester City), and two in the Europa League group stages (Arsenal/Chelsea), will have generated approximately £210 million by the end of the season, not to mention additional sponsorship revenues. All of which leads to significant prize money for the clubs; and HMRC will be looking to get their share.
Mark Levitt, a partner at Blick Rothenberg said, 'The additional prize money received by the clubs will form part of their annual turnover. Any resulting profit is liable to UK Corporation Tax ("CT"); this is obviously a potential boost to HMRC, with 18 out of 20 clubs generating profits in the year 2016/17.'
'With four English teams in the two European finals, HMRC are already eyeing up the CT on the winners' bonuses for the two victors (a potential total of £1.14 million based on £6 million at 19%). Liverpool and Tottenham paid a combined £45 million in CT to HMRC in 2018, according to the respective company accounts to 31 May 2018 and 30 June 2018.'
Whilst the clubs will be paying CT on the profits of their endeavours, the players also share in the tax burden. Paul Haywood-Schiefer, a manager at Blick Rothenberg said, 'The drama of this week will be celebrated not just by football fans across the globe, but also by HMRC. Top players’ contracts are littered with bonuses based on performances, for goals, appearances, league positions and of course cup-runs. Whilst the players will benefit from the progression to the final, those players’ bonuses will be taxed through PAYE by the club. This means that after accounting for the tax due and the NICs, the players will see 47% of any bonus passed direct to HMRC.'
Paul added, 'Furthermore there is also the employers' NIC burden on the bonuses, as the clubs aslo have to pay over 13.8% employers' NICs on the value of these to HMRC.'
Mark added, 'The bonuses paid out will reduce the CT income for HMRC; however, the increased PAYE tax and NIC will be the guaranteed win for them - whatever the results on 29 May and 1 June.'
Paul said, 'There are also the additional boosts to other businesses, with pubs, merchandisers, TV companies, advertisers and airlines all benefiting from the interest this generates. Where UK businesses’ profits increase, the CT take will also increase, so it's a big benefit all round. It’s just a pity they can’t play the finals here and give an even bigger boost to the economy.'
For more information, please contact David Barzilay