HMRC’s tax joy at Manchester United’s success

Wednesday, May 25, 2011 | Posted by: Mike Hyland
Categories: Personal | Tags: tax, HMRC, income tax, deficit, Mike Hyland, exemptions, PSBR, sport, Manchester United, football, sports, sports stars, high rate earners, UEFA, concessions, 50% tax rate

The authorities may not be able to tax Barcelona’s football squad when it comes to Wembley on 28 May but Man Utd’s place in the UEFA Champions League Final will guarantee them a tax bonanza.

Given the state of the nation’s finances at present, with a reported annual deficit in public sector net borrowing of £141.1 billion for the past financial year, you could forgive HM Revenue & Customs (HMRC) for celebrating any news that brings in more cash for the national coffers, and makes its efforts at plugging the deficit appear more successful.

Manchester United recently provided such news for HMRC when they swept aside Schalke 04 to set up a tie with Barcelona in the UEFA Champions League Final at Wembley on 28 May.

Getting around their own rules
As mentioned in my colleague Francesca Lagerberg’s recent post, we have one of the most aggressive taxation regimes for visiting sports stars and entertainers. This puts the UK in a difficult position when bidding to host major sporting events, and means that guarantees of blanket one-off concessions for foreign stars are required in order for the UK to be competitive in these bids.

The reason for HMRC’s joy at Manchester United’s Champions League progress is one such example. In order to persuade UEFA to let the UK host the 2011 Champions League Final, the Government was forced to grant exemption from UK tax to any non-UK resident employee of an overseas team who competes in the final.

If no British team had made it to the final, the Government would have faced the prospect of playing host to the horde of highly paid players competing in the final, without being able to tax the huge sums these individuals would earn for their participation.

Red devils are HMRC’s angels
As it is, Manchester United’s players will surely stand to make eye-watering bonuses from their club and through connected sponsorship deals if they are successful against Barcelona – and these sums are likely to be taxable in the UK at the additional income tax rate of 50% in the main, raising millions in tax revenue for HMRC.

So do not be alarmed if you see one of HMRC’s inspectors in your local hostelry on final night, wearing a red shirt and issuing the sort of ear-splitting cries of support traditionally reserved for the terraces.

He is simply showing his dedication to his employer, and hoping for a tax bonanza for the UK.

Image of Javier Hernandez: © Americanistadechiapas

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* Is the UK’s tough tax regime compromising the appeal of sporting events in the UK?
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* The kindest tax cut