Navigating VAT on agents’ fees during the January transfer window

The January transfer window is rapidly drawing to a close. Alongside the excitement of player transfers, there’s an often overlooked but essential financial aspect – VAT and football agents’ fees.

Agents are key in facilitating transfers, negotiating contracts and advising players and clubs. For their services, agents typically earn a commission, often amounting to a percentage of the player’s transfer fee or salary. Agent fees have risen substantially in recent years, particularly for high-profile transfers.

While these fees are part of the business of football, the VAT treatment on these payments can be complex and varies depending on the circumstances of the transaction.

VAT on agents’ fees

As a result of years of disputes between HMRC and clubs (with Birmingham City among the most high profile), specific rules apply to how VAT is treated in football-related transactions, in particular relating to who receives the agent’s services.

The services provided by football agents are typically subject to VAT at the standard rate, but the specifics depend on the ‘place of supply’. This concept determines whether VAT is chargeable in the country where the agent is based, where the player is registered, or where the club is located.

In general, if the agent is based within the UK, they must charge VAT on their fees for services provided to a club or player within the UK. However, if the agent’s client is outside the UK, the VAT treatment may differ. For example, if the transfer involves a club outside the UK, VAT may not be charged, as the service may be deemed outside the scope of VAT. Alternatively, if the player is VAT registered, they may be responsible for accounting for the VAT.

In recent years, HMRC has started paying closer attention to football agents’ fees, with audits and investigations into whether the correct VAT charge is being applied. This scrutiny has intensified due to the growth of the transfer market and the increasing fees agents receive. HMRC has also focused more closely on informal industry practices where clubs have treated 50% of the fee as being to them (with VAT being recoverable) and 50% being to the player (often with employment tax implications).

Verdict

The VAT treatment of football agents’ fees during the January transfer window is nuanced. While VAT is usually applicable, the specific details of each deal determine the exact VAT implications (both in terms of who is accounting for the VAT, where and whether it is recoverable). Agents, clubs and players must remain aware of VAT rules to ensure compliance and avoid unexpected liabilities. As the transfer market continues to expand, VAT considerations will likely increase, and potential exposures grow (together with media scrutiny), making expert advice crucial. If you’d like to discuss this, or anything else covered in this blog, please get in touch with one of our expert team who will be able to help!

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