Football's stormy relationship with the taxman

Football and the UK taxman have had a troubled relationship in recent years, whether it is clubs being served winding up orders for non-payment of tax, or players being chased for the way they have structured their personal tax affairs.

A sport that generates millions in income for clubs and players has increasingly come into the spotlight, particularly in a time of belt-tightening in many other parts of society.

The sport generates and churns huge financial sums in transfer fees, sponsorship, television rights, image rights, and other areas where collecting tax may be a concern for HMRC.

It is all a far cry from previous decades when footballers would get weekly wages, then maybe a testimonial match, and finally open a modest business such as a pub. Their tax affairs were relatively straightforward.

Now, with multi-billion pound broadcast deals, and players sometimes being paid through exotic financial vehicles, the sport is attracting a great deal of attention from the tax authorities.

In December HMRC declared that since 2014-15 it had delivered £158m in extra tax from tackling rule breakers in the football industry.

At the same time it was reported that more than 180 Premier League players were using private companies and other legal schemes to cut millions from their tax bills.

"HMRC has definitely decided it is time to play hardball with the football industry," Andy Brown, editor of website The Sports Integrity Initiative, tells the BBC website.

"Especially in the light of things like the Panama Papers, which showed how the rich generally can exploit secretive offshore tax regimes."

The release of the Panama Papers contained information related to football governing bodies Uefa and Fifa, which made HMRC aware of the use of offshore shell companies within the football industry.

"HMRC is in receipt of information about offshore activities in football, and has been so for about a year now," says Anton Lane, from firm Edge Tax.

One aspect of the football tax world which has come under increasing scrutiny in recent years has been the issue of image rights payments, although there is no indication that the latest arrests are in connection with this matter.

These image rights payments involve deals, which state how the player and his club have the right to use the player's image (as something separate from the normal terms and conditions contained in standard playing contracts).

They came to the fore at the start of the 2000s, and have mushroomed since then.

The suspicion is that athletes are avoiding tax on salaries by having a large amount of their remuneration awarded as image rights payments, which could then be paid to a separate, player-connected, company.

The star would then pay corporation tax at a lesser rate than income tax.

In 2006, HMRC launched a unit to look into image rights payments, with cricket, rugby union and rugby league under the spotlight. A cap of 15% of remuneration payable for image rights exploitation was agreed in rugby union.

The taxman's probe into image rights has continued to this day, and last year HMRC's head of enforcement and compliance said a dedicated team had been set up to look at image rights, football, other sports and the entertainment industry.

"If you look at the wider context, it is not just football players who have come to the attention of the taxman, but also entertainers from other fields such as comedians," says Mr Brown.

"If a player goes to an advisor and says 'will you handle my tax for me', the expert will endeavour to pay as little tax as possible for their client."

According to Mr Lane, from firm Edge Tax, payments for image rights are often placed in offshore companies or trusts.

"If a club hires a tax expert and structures it, they could be legal, but the problem is that many put arrangements in place that don't reflect what happens in practice," he adds.

"What happens in a lot of cases is performers, including footballers, just park payments in British Virgin Islands companies. That would not work in a UK court of law."

Meanwhile, changes introduced by the government in the 2016 Finance Act have given HMRC added powers to chase and prosecute those incorrectly funnelling earnings through offshore structures.