Patrick Way KC provides an update on the rules around footballers’ remuneration and their image rights.
Tucked away in the Budget 2025 publications was a statement from HMRC that they will legislate to clarify the tax treatment of image rights to make it clear that income tax and employer and employer National Insurance Contributions (NICs) will be due in respect of image rights.
The legislation is to be included in the Finance Bill 2026-2027 and to take effect from 6 April 2027.
Currently, HMRC are engaged in disputes with approximately 100 footballers in connection with their existing image rights arrangements. HMRC’s principal argument is that the income from an image rights arrangement is trading in nature. This seems tenuous to say the least and therefore it is sensible to continue to discuss the position with HMRC with a view to finding a sensible solution.
In this respect HMRC are more open than previously to the mediation process, which I recommend.
Turning now to the new rules which will apply from 6 April 2027 practitioners will need to look at existing image rights agreements and see whether they should be changed in any way. There may be a possibility (remote I think) for arguing that certain footballers have such a distinct personality that their image rights can be separated from their employment as a footballer and therefore the new rules may not apply to them.
New rules from April 2027
Deep in the Budget publications in October 2025 was the relevant document: see https://tinyurl.com/3wth3hxs.
And within that document is found the following key wording: “Image rights payments – The government will legislate to clarify the tax treatment of image rights to ensure that all image rights payments related to an employment are treated as taxable employment income and subject to income tax, and employer and employee National Insurance contributions. This will be legislated for in Finance Bill 2026-27 and take effect from 6 April 2027.”
So it can be seen that significant changes will be made to the taxation of image rights payments. They will be treated as taxable employment income and therefore subject to income tax; employer NICs; and employee NICs.
The new regime will no doubt have application to image rights income which arises from that date onwards even if the relevant agreement commenced before then. In other words, the change is ‘retroactive’.
There are some words within the extract above which are ‘doing some heavy lifting’ and these are the underlined words in the following phrase: “image rights payments related to an employment”. So, what is meant by “related to”?
I have seen some commentaries that say that those words mean that if one can identify a situation where image rights are not related to employment then the new rules will not apply. We will need to see the legislation, of course, but this view seems to me to be somewhat optimistic: I would expect HMRC to be arguing that the new rules apply across the board.
However, I could see that if a player is retired then (depending upon the wording of the new legislation) it might be possible to say that the image rights payments did not relate to employment because there was no employment at the time. Also it might be possible to say, in the case of one or two footballers who have a very distinct image, that their image rights income relates to that distinct separate personality, rather than to their employment as a footballer.
We can all think of at least one very high-profile footballer who would have received image rights income for playing football but separately became such a “star” in his own right that payments to him for using his image might simply relate to his separate personality. David Beckham would seem to me to be a good example of an individual who even when playing for Manchester United had a very distinct image which transcended his image as a footballer.
The obvious warning, however, is that we simply do not know what the legislation will look like.
What we do know, however, is as follows.
From 6 April 2027:
(a) income related to image rights will be taxed as employment earnings;
(b) in addition Class 1 NICs will also be due.
So there will be an income tax burden. And, in addition, employer NICs at 15% will be charged in circumstances where previously there was no such National Insurance charge. Further, the players themselves will face employee NICs of 2%.
The reality is that this probably means that the standard image rights structure which has been utilised to date will no longer be tax efficient. Instead, all image rights income will probably be treated as taxable remuneration, save in those relatively rare cases where a footballer has created an image which can be said to be separate from his employment as a footballer and which, if you like, arises by virtue of his distinct personality.
How did we get here?
There are two schools of thought as to how we have got here.
The first school of thought is that HMRC have long wanted to close down image rights structures and their current arguments are by no means compelling so they need to try something else – hence the 2027 proposed changes.
From my point of view, we can see that over the past 10 or 15 years HMRC have made it their aim to tax as fully as possible all image rights structures both onshore and offshore.
Respectfully, in my view, HMRC have sought to do this in a somewhat random fashion.
Initially, HMRC sought to argue that image rights were not an asset in their own right. Therefore, any attempt to set up an image rights structure would be bound to fail because no asset was involved.
This struck me as a difficult argument for HMRC to get home, bearing in mind that:
(a) some of their manuals referred to image rights; and (b) HMRC argued that the transfer of assets abroad (TOAA) legislation would apply to overseas image rights structures (Income Tax Act 2007, Part 13, Chapter 2, starting at s.714.). But that legislation, of course, requires an asset in the first place and therefore HMRC’s argument that an image right was not an asset had to be abandoned; and (c) subsequently, in any event, HMRC entered into formal arrangements with the Premier League as to how image rights should be taxed; so this was an ‘admission’ that image rights did exist.
Expanding upon the agreement with the Premier League it can be seen that this followed on somewhat belatedly from the Sports Club case (Sports Club v HMRC Inspector of Taxes (SpC [2000] SSCD 430 (SpC 253, also known as Bergkamp & Platt v HMRC Inspector of Taxes – see Tolley’s Tax Cases 2025). In this case two well-known footballers, described as Jocelyn and Evelyn in the anonymised case, had image rights contracts which were held not to produce remuneration and so were not taxable as earnings.
In time, however, even these arrangements between HMRC and the Premier League proved unsatisfactory to HMRC and so they were more or less abandoned. HMRC then took the opportunity to challenge image rights arrangements utilised by a fairly significant number of players.
In line with this challenge, the Hull City case (Hull City AFC (Tigers) Ltd v HMRC [2019] UKFTT 227 (TC)) was litigated. This finally resulted in HMRC accepting that image rights did exist and therefore the position was simply how to tax them. The Hull City case was something of a ‘slam dunk’ for HMRC – given the facts. And so therefore in that case it was relatively easy for HMRC to demonstrate that the sums were remuneration and therefore employment income.
However, one of the interesting points that came out of the case was an admission by both parties – and an acceptance by the judge – that image rights arrangements did create separate taxable structures.
Having said that, the Hull City structure was not a particularly good one, but there were many much better ones which have proved more difficult for HMRC to challenge successfully.
Indeed, many of these image rights structures, in my experience, are successful.
More specifically, in my experience, payments of UK-source image rights income into a UK company within an image rights structure has very often resulted in corporation tax being paid at 19% and subsequently 25% (only) – and no income tax for the footballer. And then, once the footballer has moved abroad, that footballer could receive the income in the form of a tax-free distribution taking account of the rules which applied to non-residents – and so no income tax for the footballer, either.
Separately, HMRC have found difficulties in taxing some overseas structures. The position was that provided the player was a non-domiciled individual under the rules which were in existence until 5 April 2025, or provided that he was not a long-term resident in respect of the rules which applied subsequently, then, of course, to the extent that the income which arose was foreign-source income and not remitted, no UK tax would arise.
This led to two forms of ‘attack’ from HMRC.
The first attack that HMRC mounted was to the effect that the income in question (accruing to the overseas structure) was, after all, UK source. In my view, it was because of the difficulty in running this argument successfully that HMRC are now pushing through the new legislation which will apply from 6 April 2027. I say this because HMRC’s argument that the income in question was UK source was anything but straightforward. More particularly, on a commonsense basis (and also on a technical basis) the income of the foreign structure was almost certainly foreign source (depending on the facts of course) and, in my view, the obvious description of the offshore image rights income was that it was foreign-source royalty income.
Secondly, HMRC argued that having ascertained that the income was foreign source (assuming they could) they would then invoke the TOAA rules on the basis that the player could not argue that the remittance basis protected that income from UK income tax.
My view, as mentioned, is that the income arising to a foreign structure is governed by rules concerning overseas royalties. Accordingly, such income is not taxed until it is remitted into the United Kingdom so far as a non-domiciled player is concerned. HMRC resisted the argument, of course, that the image rights income was royalty income.
In order to succeed in the argument, that income was UK-source income after all, even in respect of overseas structures, HMRC, rather tortuously, have sought to argue that the income in question is trading income. This is not despite the fact that they had won the Hull City case on the basis that the relevant income was employment income.
The reason, in my view, that they sought to argue that the income in question was trading income was because then that income would accrue to a “single trade” carried on in the UK. After all, a trade cannot be split into two parts. If any part of it is carried on in the UK then all of the income (wherever it arises) is taxed as UK-source trading income (Income Tax (Trading and Other Income) Act 2005 s.6). So, their argument may reasonably be described as “opportunistic”.
So, pausing there, my view is that HMRC’s arguments to date are fraught with difficulties and that is probably one of the main reasons, in my view, why they have introduced this new rule to say that all image rights payments will be treated as taxable employment income to the extent that the image rights relate to employment.
The second school of thought is that it’s all Bryan Robson’s fault.
A possible reason why HMRC have made these changes relates to a different aspect of tax; namely, the rules in relation to so-called IR35 companies.
This takes us to the case of Bryan Robson (Bryan Robson Limited v HMRC [2025] TC09408).
Bryan Robson had two sources of income for the purposes of the tax case. One was the income he received as an ambassador for Manchester United; and the other was image rights income.
In the case Judge Beare held two things:
(a) the income which he received in his capacity as an ambassador for Manchester United was within the scope of the intermediate legislation and therefore subject to income tax (bad news for Robbo); but
(b) payments made for the exploitation of his image rights were not (good news).
The ‘good news’ for Bryan Robson came about because the relevant contract included a distinct provision for Manchester United’s exploitation of his image rights, and Judge Beare accepted that those rights had a genuine commercial value. They were not simply a mechanism for arranging for additional remuneration to be paid to him for the services provided. More particularly, the judge held that the image rights income was not in respect of employment-type services which he performed. Rather they were consideration for a separate and assignable intellectual property right, namely, his image. Manchester United had a genuine commercial interest in using his image and had done so in practice.
As others have neatly said the judgment was very much a “game of two halves”. In other words, in the second half of the proceedings Bryan Robson won on the basis that image rights existed as a separate distinct asset and the income which arose therefrom was not employment income.
So the second school of thought – as to why the new legislation is being introduced – emanates from the Bryan Robson case and the feeling, perhaps, that HMRC wanted to ensure that any form of income which relates to image rights must be taxable as earnings following that case.
Does HMRC ‘have it in’ for footballers?
Separately, some commentators, have queried why HMRC seem to have an animus against footballers. Those commentators consider that HMRC may be pursuing something of a vendetta against them. After all, these commentators point out that it is often overlooked that footballers contribute a breathtaking amount of income tax into the system. For example, the recent Sunday Times list of the highest-paid income tax payers showed Erling Haaland as having paid £16.9m in income tax last year, and Mo Salah paid a not too shabby £14.5m himself.
Further, when you realise that roughly 47% of a footballer’s remuneration is taxable and when you consider that a significant number of those players are earning £300,000 or more per week, you can see that the income tax take from footballers is phenomenal.
The fact that some people consider there is a vendetta against footballers can perhaps be supported by the fact that my understanding is that approximately 100 Premier League (or former Premier League) players are currently under investigation in respect of image rights income contracts.
How to deal with existing problems
As far as dealing with the existing issues that arise from image rights structure where HMRC, as mentioned above, consider that UK-source trading income arises. I would resist this argument. In my view, the income is royalty income and in my view is foreign source if it relates to overseas image rights. Categorically, in my view, it is not trading income.
As far as resolving the question is concerned, from a practical point of view I have had recent good experiences with mediation. Although the procedure seems odd (at first blush) because the mediator is an HMRC official, in my experience mediation can produce serious benefits and therefore I would not be dismissive of it.
After all, HMRC do seem, nowadays, to approach mediation in a much more sensible way than previously and with a view to arriving at an appropriate outcome for both parties. In the past I have not been convinced that this was the case and often the mediation was unsatisfactory as it was unnecessarily hostile and uncompromising from the first minute!
How to deal with the changes
The forthcoming changes are a little over a year away but nevertheless existing structures should be carefully considered. It seems to me that the reality is that most image rights structures will no longer work from a tax point of view. That is not to say that they should not be entered into because they are very lucrative from the player’s point of view. Rather, it just means that income tax and NICs implications arise.
I can see, however, that it may be possible in certain limited cases to say that the image rights do not relate to any employment.
If the player has retired I could see it would be more difficult for HMRC to argue that the image rights payments relate to employment. It may be, of course, that when we see the new legislation it will encompass both the existing employment and previous employment.
Also, if the player in question really does have a very significant separate personality then I could see that it might be possible that the new rules do not apply to him.
The sensible thing will be to look at image rights agreements closer to the 6 April 2027 in order to ascertain what should be done.
But, finally, I would not be inclined necessarily to ‘let the tax tail wag the dog’ (apologies for the cliché) and abandon image rights arrangements all together. Proper bona fide image rights agreements are very remunerative and are worth having even if in due course they turn out to be less attractive from a tax point of view than currently.
Conclusion
We should watch this space to see what is meant by “in relation to”. I fear that it probably is intended to catch all image rights income. But the rules (as yet unpublished) may not apply to retired footballers.
Also, there may be some footballers who have such an independent and strong personality – entirely separate from their employment as a footballer – that it may be worth organising for separate image rights agreements to be entered into for their benefit. These would be image rights which are wholly distinct from their activity as a footballer.
But let’s wait for the legislation!
- Patrick Way KC is a barrister at Field Tax