Understanding Image Rights Companies in Football
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Image rights have become a significant part of a player’s income. They allow players to benefit from their off-field commercial activities, which are not necessarily rewarded as part of their playing contracts, such as endorsing products or sponsors associated with their club.
Setting up an image rights company can help mitigate the tax payable on such payments and other sponsorship deals. Rather than receiving image rights/sponsorship payments as salary, the club/sponsor pays directly to a player’s company. Any profit is then taxed at corporation rates of 25% rather than the 45% income tax rate for additional taxpayers. National insurance is also not payable or deducted on payments into a company (13.8% for the club and 2% for the player), so there is a benefit to both parties in structuring the payments this way.
Because of the initial corporation tax due on any payments to a company, it does not make sense to draw benefits from an image rights company whilst receiving regular income. Any income drawn as an additional rate taxpayer will be taxed at 45% for income or 39.35% for dividends, which can lead to a double taxation when considering the initial corporation tax. This has the effect of defeating the whole point of adopting the company structure in the first place.
The best thing for a player to do is to treat their companies like a ‘second pension’, which is not intended to be accessed until their football career ends. Money that accumulates within an image rights company can be invested in a variety of ways and allowed to grow tax efficiently for ‘life after football’. The value within the company can then be accessed once the player hangs up their boots and needs the income, at which point their tax rate has likely fallen.
While there are costs associated with managing and maintaining an image rights company, these are generally outweighed by the tax efficiency gained, especially for players who are in receipt of significant image rights payments.
Some other key points to remember. Players often want to give their company a cool name that incorporates symbols or nicknames. However, it is better to be vanilla, as when you set up a company, it becomes part of the public domain and is easily searchable online.
Players also get caught out by using the company for things that are not ‘wholly and exclusively’ for the purpose of the company. Examples of this are players using the companies to pay for cars and home security or using the company credit card for personal use. It’s crucial to remember that the company’s funds should only be used for its intended purpose. Any benefits drawn during a player’s career are likely to be tax inefficient.
Players’ circumstances are unique, so while the benefits of using image rights companies are clear, players must seek advice to ensure that it is suitable for them. Please note that this post does not constitute advice.
