The Inland Revenue has confirmed that it will move to close the tax loophole used by Premier League footballers to protect their multimillion pound salaries, as revealed in The Independent yesterday.
The EFRBS – employer-financed retirement benefit schemes – have become popular with Premier League and some Championship clubs and are routinely offered as part of contract negotiations to top players.
They allow high earners such as footballers or City bankers to pay 50 per cent of their income at source into trusts, which prevents the Revenue from taxing them fully.
The trusts can be used to buy assets such as property and are particularly attractive to foreign players who can keep their money offshore and who intend to leave the United Kingdom when they finish playing professional football. They have become extremely popular with footballers subject to the new 50 per cent high rate of income tax.
Clubs also favour the EFRBS because these allow them to make a saving on the 12.8 per cent National Insurance payments they would otherwise have to make on the proportion of the salary that is placed in a trust. It has also allowed them to give players a benefit to compensate for the new rate of taxation of high earners.
The feeling among the football fraternity is that players are increasingly targeted by the Revenue because of the very public nature of their contract negotiations and the reporting of their wages. It is the current Government that has pressed ahead with plans to bring forward the legislation to close off EFRBS.
The Treasury and the Revenue announced this month that they intend to shut the loophole and force those using them to fall into line with the £25,000 tax relief permitted annually on pensions. There is a concern among players that their funds could be taxed retrospectively.
The Revenue said this month: "These vehicles are essentially a type of employee benefit trust, and alongside other intermediary vehicles can be used to disguise remuneration and avoid, reduce or defer payment of tax.
"The June Budget confirmed that the Government will take action against intermediary vehicles, including EFRBS, being used in this way."