Premier League stars using loophole to save millions in tax

Clubs employ pension scheme first used by bankers to make contracts even more attractive to leading players

Top Premier League footballers face fresh public indignation today as
The Independent reveals they are using a major tax loophole to protect their multi-million pound salaries from the tax authorities.

Experts in the football industry have told The Independent that around 75 per cent of Premier League clubs are now using a scheme known as EFRBS to allow players to avoid up to 50 per cent of income tax. It has come into the mainstream over the last 18 months as clubs try to find a way around the problem of losing out to clubs from across Europe on players put off by the new 50 per cent top level of income tax that will be introduced in April.

It is understood that many leading Premier League clubs, including Manchester City and Chelsea, have used EFRBS – employer-financed retirement benefit schemes – in order to make their offers to players even more attractive. Completely legal, the scheme allows players to sacrifice up to 50 per cent of their wages at source to be placed in a trust that is set aside for their retirement.

It was first used by City bankers to avoid paying tax on their bonuses but has become very popular with footballers after the Inland Revenue closed down the "image rights" loophole that was used to great effect in the late 1990s and early part of the last decade to give predominantly foreign players tax relief.

The EFRBS scheme also allows clubs to save on National Insurance payments – an extra 12.8 per cent on top of the player's salary – because the money is paid straight into an EFRBS and is therefore not liable. With wage costs going inexorably upwards for the elite players, fuelled by City's willingness to break the wage ceiling, clubs are increasingly looking around for more tax-efficient ways of paying their players.

Industry experts believe that there is a very good chance that Wayne Rooney's new deal at Manchester United, understood to earn him up to £200,000 a week including bonuses, would have included an EFRBS. It would potentially mean that the Manchester United striker will have a substantial retirement fund when he finishes playing. However, the Premier League's best players, as well as high-earners in the City, are now the subject of government legislation to close the tax loophole.

Pete Hackleton, an associate director at RSM Tenon and an expert in EFRBS, said that they had become a "popular" major feature in deals for top players in the last 18 months. "We have worked with a number of Premier League and Championship clubs to set up EFRBS," he said.

"EFRBS have been around for 15 to 20 years but as image rights have become a hot topic for HMRC [Her Majesty's Revenue and Customs] and with the increase to the top rate of income tax, people have looked for an alternative."

In the case of Yaya Touré, thought to be the highest-paid footballer in English football, City are understood to have agreed with him a weekly wage that increases to £221,000 in April in order to compensate for the rise in the top rate of income tax to 50 per cent.

Even with the most lucrative broadcast deals in world sport, some of the Premier League's members are still finding it difficult to offer competitive wages to players when in competition with leagues like Spain and Russia.

There will be little public sympathy for highly paid footballers and their attempts to reduce their tax liabilities. However, there have been complaints from Premier League managers that the levels of taxation are affecting the ability of their clubs to attract players. Sam Allardyce said in August that the new top level of tax had had a direct effect on Blackburn Rovers' ability to sign players.

He said: "You are putting an extra 10 per cent on top straight away due to new tax rules. It almost becomes impossible to meet for a club like us."

At the other end of the Premier League, Arsène Wenger has also identified the new top rate of income tax as the biggest obstacle to signing new players.

"The domination of the Premier League on that front will go, that is for sure," he said in April 2009. "It will be a financial problem for all the English clubs."

The former Fulham and Blackburn footballer Udo Onwere, now a lawyer specialising in tax and trusts, said that his clients in the Premier League had prepared themselves for their EFRBS to be closed down by the Inland Revenue. "It could be at the end of the year, it could be next month," he said.

Onwere, who works at Thomas Eggar solicitors, said that there were fears among players that changes to the rules could be retrospective and claw back money already put into trusts by players.

A spokeswoman for the Inland Revenue said last night that as of this month it would be acting on the government's initiative to bring forward legislation to curb the use of EFRBS for high earners.

The Inland Revenue said in a statement it would "ensure that funded EFRBS are less attractive than other forms of remuneration".

It added: "It will also continue to monitor changes in patterns of pension saving behaviour for all other forms of EFRBS on which it will be ready to act if necessary to prevent additional fiscal risk."

News
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
news
Have you tried new the Independent Digital Edition apps?
Caption competition
Caption competition
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

Bleacher Report

Daily Quiz
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower