The taxation of image rights has and continues to be a thorny topic for sportspersons and their employers. Although much of the attention in the press has focused on the football industry, the principles are applicable to any sport in which a sportsperson’s image rights have some potential commercial value.
In the UK, HMRC have been focusing attention for a while on payments made to corporate entities which hold and exploit the image rights of a sportsperson. Although case law has suggested that this approach to remunerating a sportsperson is possible, two recent developments suggest that this mechanism may now be short-lived. The first development is HMRC’s changed attitude following RFC 2012 Plc (in liquidation) (formerly The Rangers Football Club Plc) v Advocate General for Scotland  UKSC 45 (the Rangers Case), and the second is the publication on 10 April 2018 of a consultation document aimed at tackling tax avoidance involving profit fragmentation.
These two developments together mean HMRC is likely to apply increased scrutiny to the characterisation of payments paid to image rights companies, in particular where negotiated alongside employment contracts. Employers should ensure that there is sufficient commercial justification for payments made to third party companies (whether offshore or otherwise) in respect of the image rights of a sportsperson, with supporting documentation from the time of negotiating the relevant contracts evidencing the rationale behind those payments. Where necessary, employers should review their current arrangements for remunerating employees (including, in particular, record keeping procedures) and consider and/or take advice on whether these need updating, involving employees in the review process where necessary.
Matthew Hodkin and Will Scott in London, consider some of these issues in more detail in this article. Click here to read the full article - https://www.nortonrosefulbright.com/knowledge/publications/167915/use-of-image-rights-companies-taxation