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Dual representation arrangements in football - don’t get caught offside

24 June 2024

HMRC has published new guidance that advises what it expects clubs, footballers and agents to consider when entering into dual representation agreements. We have outlined some of the key points from the guidance for football clubs, agents and players to be aware of. 

In May 2024, HMRC published new guidance for football agents and clubs engaging in dual representation contracts. The key message from HMRC is that it will be scrutinising dual representation arrangements as it perceives this area as being subject to manipulation by agents, clubs and players. The guidance stresses the importance of thorough documentation to evidence the scope of services provided to each party by agents. 

What is dual representation?

Dual representation is an accepted practice in the football industry and allows for an agent to provide their services to both a player and a club when negotiating a new signing or contract.

Tax receipts for HMRC are reduced by agents apportioning more value to their dual representation service to the club rather than the player. The payment by the club for services provided to the club will not be subject to income tax and National Insurance contributions and the club may be able to recover the VAT incurred on such fees. However, a payment by a club to an agent for a player's agent fees will be subject to income tax and National Insurance under PAYE and the VAT paid by the club cannot be recovered by the club.

HMRC's guidance is an indication of its intention to clamp down on these arrangements being used for tax avoidance purposes. The topic has been covered on BBC's Newsnight and by Tax Policy Associates. With all major political parties looking to fund pledges in manifestos by clamping down on tax avoidance and with football regulation a hot topic, the parties involved in dual representation arrangements will need to be careful to evidence that apportionment of payments to agents under dual representation arrangements reflects the commercial reality of the services provided by the agent to the respective parties. 

How does dual representation achieve a tax saving?

HMRC's examples illustrate a significant tax advantage to shifting the agent's fee between the player and the club. 

A shift in the value of services between player and club generates tax savings on sliding scale; the more value the club is able to derive from the player's agent, the more it can save in tax. However, as the value of services shifts from the player to the club, so does the risk that HMRC will question the arrangement. 

HMRC's view on dual representation

HMRC accepts that dual representation is a legitimate practice but it evidently has doubts regarding the apportionment of the agent's services between the player and the club. 

HMRC has maintained that a default 50:50 apportionment of the agent's fee between club and player is unacceptable. Instead, HMRC expects an "evidenced and commercial justification for payments made" and asserts its expectation that a player should be apportioned the majority of the value of services provided in dual representation contracts. 

Each case needs to be considered separately, as a blanket approach is not appropriate. The commercial reality of the contract negotiations will need to be reflected in any apportionment. 

How can sports agents evidence the apportionment of services?

HMRC expects that the respective parties to a dual representation agreement document their relationship in a sufficiently detailed manner as to evidence the apportionment given to the fees charged by the agent. 

The list of documents expected to be retained by the parties are set out here. 

Compiling these documents will not be enough to evidence the relationship and HMRC will consider when such documents are signed. HMRC confirms that "we see dual representation documents that are dated on the same date as the player’s employment contract is entered into. HMRC view this as an indicator that dual representation or any values attributed to player and club services may not reflect the commercial reality."

Throughout the engagement with the agent, the parties involved should be collecting evidence to demonstrate that the agreed services are in fact being provided. In an industry where much of the business is conducted via telephone calls, it is important that contemporaneous notes are taken throughout the negotiations. Similarly, text messages, WhatsApp messages, and emails should be filed and retained to evidence the services received. Additionally, invoices should be sufficiently detailed as to evidence who is receiving the related service. 

How should clubs and agents respond to HMRC's new guidance on dual representation?

Before entering into a dual representation arrangement, clubs and agents should take legal and tax advice as to the merits of entering such an arrangement. Before, during and after the negotiations take place, relevant documents should be created and retained by the parties to justify the apportionment of fees as HMRC are likely to increase its investigations into these arrangements. 

If you have any questions about this new guidance or any other tax queries, please contact our expert Tax team. 

Written by: Douglas Pyrke, James Cashman and Markos Phillips

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