Sun Times: Top footballers play non-dom tax game



The Sunday Times
July 22, 2007, p. 9

Top footballers play non-dom tax game

Robert Winnnett and John Elliott

MORE than 300 top-flight footballers are avoiding millions of pounds
of income tax by using loopholes that Gordon Brown pledged to close
more than a decade ago.

The players and dozens of managers are declaring themselves non-
domiciled or claiming non-resident status by commuting in and out of
Britain for matches and training sessions.

The tax breaks have helped to attract some of the world's best
footballers to Britain, but also mean that, despite their multi-
million-pound earnings, many of them are paying lower rates of tax
than their supporters.

In total, 302 footballers or managers have "non-domiciled" status in
Britain and a further 67 claim they are "not resident", according to
Treasury documents released under the Freedom of Information Act.

Among those who qualify for non-domiciled status are the Manchester
United stars Cristiano Ronaldo, who is Portuguese, and Owen
Hargreaves, who was born in Canada but plays for England. Their
representatives declined to comment.

David Beckham's spokesman said that he was non-resident in Britain for
tax purposes but would pay tax on his earnings in America.

Almost half the players in the Premiership are from overseas, and the
poor showing of the national team is blamed by some on the
displacement of home-grown players by foreign stars. Sven-Goran
Eriksson, the former England coach who is now managing Manchester
City, is thought to be a beneficiary of the tax loophole.

A source familiar with the arrangements of managers said: "Non-
domiciled status is a perfectly legal status. It's automatic if people
like Sven wish to have it." Brown pledged to close the loopholes in
opposition but has so far failed to act despite the scheme being
"under review" by the Treasury since 2002.

Accountants and lawyers have devised sophisticated ways for
Premiership stars to benefit from the loophole. The non-domiciled
players must be born abroad or have parents born abroad. They
typically sign multiple contracts for their services.

One contract pays the player for matches in Britain. They have
another, more valuable contract for their "global image rights", which
covers the money earned by the club to sell their merchandise and
television rights. A third contract pays for any foreign appearances.

British tax is typically paid only for money earned on the first
contract, with money earned on the other contracts paid tax-free to an
offshore tax haven.

In contrast, players in Spain must pay tax to the Spanish government
on their worldwide earnings.

A memo from a Revenue official in May 2005 about the nondomicile
system states: "Quite a lot of the ND [non-domicile] and NOR [not
ordinarily resident] cases dealt with . . . were either professional
footballers or professional football coaches/mana-gers. Top football
players and managers earn large amounts of money and so may well have
relatively complex tax affairs."

Mike Warburton, a tax partner at Grant Thornton, the accountants,
said: "It is definitely an important draw for foreign players and
these rules have certainly been a factor in the Premiership becoming
the top league in the world."

A football agent who represents several household names said: "I have
heard of people flying in and out of the country for training sessions
and matches - particularly managers. It is a game now staying one step
ahead of the tax authorities."

Footballers are the latest group to be identified as beneficiaries of
loopholes offered to the global super-rich by Britain. The heads of
private equity firms have recently come under criticism after it
emerged they paid tax at a rate of less than 10% on multi-million-
pound earnings.

Vincent Cable, the Liberal Democrat Treasury spokesman, said: "We need
an open and transparent investigation into the use of nondomicile,
followed by a tightening of the rules. The number of nondoms is rising
rapidly as people realise the easy pickings on offer."

A Labour peer said: "The situation does seem to be becoming deeply
unfair. These guys [footballers] are paying lower rates of tax than
the working men paying a fortune to watch them."

The Treasury documents reveal that there were 77,000 nondomiciled
people in Britain in 2002, avoiding an estimated £1 billion in tax.
The number is understood to have risen to almost 200,000 since then.


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