Top-flight Stars Look For Tax Loophole

Premier League footballers are reportedly looking to use a loophole to avoid paying the new 50p income tax rate by asking their employers to pay salaries as interest-free loans which attract little in the way of levies.

The scheme, which is being considered by stars at Manchester United, Arsenal and Liverpool, would allow millionaire players to initially pay as little as 2.5% tax on some of their earnings.

The top-flight players are having to resort to such measures to prevent an exodus of foreign talent following Chancellor Alistair Darling’s announcement of the tax increase.

This weekend accountants at Baker Tilly, who advise 40 top players at clubs including Arsenal, Liverpool, Bolton and West Ham, admitted that foreign players were examining whether their net pay would be higher in less prosperous leagues in countries with lower tax regimes.

Graham Garner-Jones, a partner at the firm, said he had been asked by a Spanish Premier League footballer to find out if he would be better off returning to his native country.

‘This player earns £50,000 per week, or around £2.5m a year, and at the moment his take-home pay is a shade under £30,000 per week. When the 50p tax rate comes in, he will be around £4,000 per week worse off playing in England than in Spain, where there are no planned tax rises.

‘It is definitely the kind of number that’s exercising players’ minds and some are definitely considering whether to be here or not. This is a big issue for clients.’

The proposed scheme to use interest-free loans is based around the HM Revenue & Customs’ treatment of the loans as a ‘benefit in kind’ and taxes only 5% of the amount borrowed. In this scenario a loan of £1m would make a footballer liable for 50% tax on only £50,000 of that amount, an overall tax rate of 2.5%.

Top footballers have for many years sought to reduce their tax bill, often setting up trusts and property portfolios to channel their earnings.

This week accountants at Deloitte will publish a report showing that the combined wage bill for the Premier League’s 20 clubs has broken the £1bn barrier.