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
news

Emergency call 'started off dumb, but got pretty serious'

News
people

Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'

Arts and Entertainment
JK Rowling is releasing a new Harry Potter story about Dolores Umbridge
arts + entsJK Rowling to publish new story set in wizard's world for Halloween
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites those Star Wars rumours
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
people

Thought you'd seen it all after the Jeremy Paxman interview?

Arts and Entertainment
On The Apprentice, “serious” left the room many moons ago and yet still we watch
tv

Greatest mystery about the hit BBC1 show is how it continues to be made at all, writes Grace Dent

News
i100
Life and Style
tech

Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into conflicts
Arts and Entertainment
A scene from David Ayer's 'Fury'
film

"History is violent," says the US Army tank commander Don "Wardaddy" Collier

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

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker