Category Archives: Sports

Make sure you get the full picture when considering Premier League wage tax issues

Last Sunday, the Sunday Times went back to an old cause célèbre for the paper with an exposé on tax avoidance by top footballers (Rooney, Barry Walcott).

Previously the ST had exposed the practice of top footballers having their reward split.  One sum is paid as traditional salary, subject to income tax and national insurance.  Another payment is made to their service company for image rights.  Apparently even someone like Joey Barton has image rights, so you can see that it is all somewhat iffy.

Broadly the payment goes into the service company, avoiding the income tax and national insurance.  Foreign players could exploit this to its fullest extent because of their non domicile status.  The image payments could go into an offshore entity to be extracted by the player once they had finished playing in the UK and cease to be UK resident.  As long as income from the offshore entity was not remitted to the UK whilst they are UK resident for tax purposes, they pay no personal tax on this.

Our home produced talent does not have this option.  What they are doing is to take a loan from their service company, rather than salary or dividend.  The loan is subject to tax under the benefits legislation but it is taxed at the beneficial rate of interest, currently 4%.  Up to 5 April 2010, the tax would be 40% of the interest so calculated.

After 5 April 2010, the increase in the top rate of tax to 50% means that the tax is just 2% of the loan each year.  So a loan outstanding for 3 years attracts tax of 6%.  Of course, in the meantime the loan can be put to good use personally to secure a better net return.

In fairness to our footballers, the same practice is rife in the City as well.  The idea will be to take salary or dividend to repay the loan, when the top rate of tax falls.

Some of the more aggressive planning and advice is to the effect that the loan need never be repaid and could be written off.  This could be through the footballers going non-resident and then liquidating the company.

My concern, in reading the article, was that it was selective in its attention to detail in order to draw out the theme.  It may have left readers (including Lambert Chapman LLP clients) wondering why this cannot work for everybody with their own company.

Buried away in the text was an acknowledgement that the payment of the image rights does bear corporation tax at 28%.  In setting out the savings for the footballers, this payment was not deducted from the saving, as it should be.

Nowhere in the article did I see any reference to what we used to call Section 419 tax (now Section 455 tax).  This is the tax which has to be paid over to the Revenue if a director’s loan account is still overdrawn more than 9 months after the company’s year end.  The tax is 25% of the overdrawn balance.  It is recoverable but only after the loan is repayable.  This may not be a problem for Wayne Rooney.  £1.6 million goes into his image rights company and a Section 455 payment of £400,000 is made to the Revenue.  Cash is not a problem.  The company is forgoing some investment income (net of corporation tax relief of 28%) but not a huge sacrifice in the overall scheme of things.

The ordinary business owner, by contrast, may not have the liquidity in their business to be able to transfer cash for long term keeping with the Revenue.

The Revenue have already done battle on the question of image rights and some premier clubs are having to pay up additional PAYE.  I remember that, in the world of football, what the player gets is always ‘netto’.  The Revenue are now looking at the question of these loans and seeking to attack them as shams.  It seems to me that they look at taking similar action to what they have done with EBT’s and EFRB’s by charging PAYE and national insurance on loans to employees.

Exploitation of the loan arrangements are available to everyone but the pitfalls will rule it out for a lot of people.

If you need clarification on this topic please call Paul Short on 01376 326266.

Uncle Audley returns from The Ashes Down Under

I was just settling down to enjoy Silent Witness when the telephone rang. “Who could that be,” I thought as I picked up the receiver to hear a familiar voice. It was Uncle Audley back from his trip of a lifetime to Australia and New Zealand culminating in watching the final two Ashes test matches.

“Dear boy I had to call. Never seen anything like it in my whole life”

“Yes I understand the south island in New Zealand has some spectacular views” I replied.

“What” he stuttered, “What nonsense are you talking? It’s the cricket I’m talking about. Having only seen matches in this Country to see us pound the Aussies two games in a row brought me close to tears. Having started in 1948 with Don Bradman, Arthur Morris, Ray Lindwall and Keith Miller pounding us into the ground and then a variety of other Aussie sides overpowering us in both our back yard as well as their own it was fantastic to see us so comprehensively overpowering them and making them eat dirt. 

Yes I know we’ve had some spoils with Len Hutton winning them back, Boycott leading the charge under Illingworth in 1970/71 and Brearley beating a weakened side with a young Botham before our last victory away but there has been too much one way traffic.

When I booked the trip I fancied we might be competing in a close run series but it was so much better. Melbourne is a big old place – not much like a cricket ground and pretty empty at the end and Sydney has that lovely old Pavilion and Member’s stand. Both grounds that I recall seeing at the pictures when the tests were being played so to finally get to them was a dream come true.

But what was even better was that we played real cricket. Not that stuff that’s become commonplace; an excuse for unadulterated slogging, not protecting your wicket and bowling any old rubbish with no respect for line and length. No this was proper cricket – like the Aussie’s did us with last time when they won 5-0. What it shows is that no one can cope with such accurate, repetitive and quality bowling and guys like Anderson, Tremlett, Bresnan and Broad should be duly proud of their performance.

Finn did well but was expensive and Swann after a couple of ropey sessions did very well. But it was in the batting department that we really excelled and our own boy Cook doing most of the damage.

With only the great Wally Hammond doing better in Australia we must be proud of his achievements. Yes he went to Bedford but he’s a local lad and those who helped coach him over at Maldon must take a bigger pat on the back than they’ve had so far.

He needs to play a few more games for Essex next year to get more spectators to the County Ground – I shall be putting a short note in to East with my membership renewal when I get down to my post”.

So the rest of the holiday was good? I enquired.

“Rest of the holiday? We’ve won the Ashes for goodness sake forget the bloody holiday. Trott, Strauss and Pietersen might be South Africans but I’ll forgive them for the moment. Met some damn fine chaps out there too. Bit barmy I was told but damn good eggs in the hotel bar I can tell you; made me late for breakfast a couple of times.”

So, you’ve nothing to complain about at the moment? I asked.

“Complain, complain what’s there to complain about?”

Give him a couple of days I thought as I put down the receiver. Audley, it’s good to have you back!

Youth Football roundup for our sponsored sides

Great Notley Strikers

Having won promotion to Division 1 last year the Strikers are facing some stiff opposition this season. Our programme has been tough facing 3 of the top 4 sides early on this year so we lost our opening 4 League games albeit narrowly and putting in some brave performances.  

The Strikers have, however, fared better in the ‘group’ stage of the League Cup, drawing 2 out of 3 matches and have a real chance of reaching the Knock Out semi final stage.

Despite the results, the Strikers have competed well and played some excellent entertaining football and certainly look the part in their splendid new kit which we thank Lambert Chapman LLP for.

Clacton Athletic U13 Girls

The Clacton Athletic Under 13 girls are up against formidable opponents this year. Although they have been playing well and the matches are of extremely high quality, they just haven’t managed to find the back of the net as often as they need to.
They are being tested each week, and improving greatly – last year, in the “B” division they were so far ahead of the opposition the games were not nearly as exciting or challenging. This year, there is much more passing, more heading of the ball, and more tactics being employed.
Spurred on by their new kits, sponsored of course by Lambert Chapman, I am hopeful that they will continue to enjoy the game and improve their position in the league as set out below:
 

 

 
 
 
P W D L Pts  
Leigh Ramblers 8 8 0 0 24
S & T Academy 9 8 0 1 24
Little Thurrock Dynamos 8 7 0 1 21
Writtle Minors 8 4 0 4 12
East Thurrock United 8 3 2 3 11
Hawkwell Athletic 9 3 2 4 11
Tigers 9 3 0 6 9
Clacton Athletic 9 2 1 6 7
Redbridge Ladies 9 2 1 6 7
Hutton Girls 9 0 0 9 0