West Ham players are angered by the non-payment of so-called ‘image rights fees’ by the club’s owners. However, the issues are broader than West Ham and relate to the legitimacy of such payments at a time when football is facing a clampdown by the tax authorities who are eager to put an end to what they see as loopholes.
West Ham players are angered by the non-payment of so-called ‘image rights fees’ by the club’s owners. However, the issues are broader than West Ham and relate to the legitimacy of such payments at a time when football is facing a clampdown by the tax authorities who are eager to put an end to what they see as loopholes.
The dispute at Upton Park is about payments above salary that are intended to reward footballers for the commercial exploitation of their names. Such payments are normally exempt from tax and National Insurance. They have become key elements in the reward package for top footballers who set up companies to handle the deals. They can boost a player’s earnings by one third.
Revenue and Customs has been monitoring image rights deals to ensure that they are not used as a means of tax avoidance. When paid to an image rights company they are taxed at the corporation tax rate of 21 per cent rather than the top personal rate of 50 per cent.
At least one player at West Ham is reported to have threatened legal action after going six months without receiving the payments. West Ham have used the threat of a clampdown by the tax authorities as the reason for not fulfilling contracts. Arguing that the club could have to pay up if it was decided that excessive payments had been made, the club has frozen some payments, asking players to get their representatives to talk to the tax authorities. The club are also thought to have sought to change the terms of some image-rights contracts.
David Sullivan has insisted that the club is simply withholding payments until the tax position is resolved. The tax that is potentially owed is being held in an escrow account. They hope that the matter can be sorted out within a few months.
Image rights present difficult issues for clubs. It could be argued that West Ham are simply being prudent, but they have gone out of a limb and there could be an impact on player retention and recruitment if the issue is not sorted out.