Sports Image Rights Tax Comparison
HMRC allows up to 20% of a footballer's/athlete's total remuneration to be treated as image rights (taxed through a company at 19–25% CT) rather than employment income (taxed at 40–45% income tax). The 80/20 rule applies.
Frequently Asked Questions
What is the 80/20 rule for sports image rights?
HMRC's informal safe harbour allows athletes to receive up to 20% of total remuneration as image rights payments to a personal service company, with the remainder treated as employment income. Exceed 20% and HMRC will likely challenge the arrangement.
How are image rights taxed compared to salary?
Salary is taxed at income tax rates of 40–45% plus NIC. Image rights paid to a company are taxed at corporation tax rates of 19–25%. The saving can be substantial for high earners — 20–25% on the image rights portion.
What is a Notional Interest Limitation (NIL)?
NIL is an HMRC concept used in tax investigations where they determine what portion of income genuinely relates to image rights versus employment. If the arrangement lacks commercial substance, HMRC can re-characterise the entire payment as employment income.
Do football clubs withhold PAYE on image rights?
No. Image rights payments are made to the athlete's personal service company (PSC), not as employment income. The PSC pays corporation tax on the profit, and the athlete extracts funds as dividends or salary.
Has HMRC successfully challenged image rights arrangements?
Yes. HMRC has won several tribunal cases where the image rights payments were disproportionate, commercially unjustified, or where the athlete had no genuine commercial exploitation of their image (e.g., Rangers Tax Case, Lineker & Co).
What evidence supports a genuine image rights arrangement?
Commercial image rights contracts with third parties (sponsorships, endorsements, appearances), a track record of commercial exploitation, and independent valuation of image rights are all helpful in demonstrating the arrangement is genuine.
What tax is paid when dividends are extracted from the image rights company?
Dividends are taxed at 8.75% (basic), 33.75% (higher), or 39.35% (additional rate) after a £500 dividend allowance. The combined CT + dividend tax typically still leaves a net benefit over straight employment income for high earners.
Is PAYE required on image rights payments?
If the athlete is treated as an employee of their own PSC, PAYE applies on salary. However, dividends are not subject to PAYE. The PSC structure avoids employer NIC on the image rights portion.
Are overseas image rights arrangements riskier?
Yes. Routing image rights through offshore entities triggers additional anti-avoidance rules, including transfer of assets abroad legislation (ITA 2007 s716) and the disguised remuneration rules (ITEPA 2003 Part 7A).
What is the EBT (Employee Benefit Trust) risk for athletes?
Using EBTs to receive image rights income was aggressively challenged by HMRC and resulted in the Rangers FC case (Supreme Court 2017). Genuine image rights PSC structures are different but must be carefully documented.
Can non-Premier League athletes use image rights?
Image rights arrangements are only commercially justifiable if the athlete has genuine, exploitable commercial image value. For lower-profile athletes, HMRC is more likely to view any split as artificial.
What records should the image rights company maintain?
Board minutes, commercial contracts with third parties, invoices for image usage, evidence of actual exploitation (TV appearances, social media reach, endorsements), and annual CT600 filings with full accounts.