Re: Liquidation rumours : Sun Jul 31, 2011 7:29 pm
Bubba wrote:
That article is over two years old. Is it relevent to this rumour?
That's when it reared it's head and has been ongoing for several years (as does everything with the Inland Revenue) so yes it is still relevant. And a good explanation has been provided by Adeybull on the aforementioned forum link:
"If you pay a substantial part of an overseas player's package as "image rights", how it usually works is that the player sets up a personal service company in a tax haven - say Guernsey, but can be far more exotic. The player sells his image rights to his PSC, which then invoices the club. The club then merely pays the invoices - and pays the player a lot lower salary as a result. This saves employers' NIC (was 12.8% until the recent 1% increase). That saved the club money, and USED to be a nice dodge to avoid the salary cap when the cap value included employers' NIC. However, the RFL got wise to that which is one reason why the cap value is lower but does NOT included NIC.
But the REAL advantage was that the player received 100% of the payment, not 59% as would be the case if the image rights income was subject to tax and employees' NIC. This is because no NIC is payable on such payments, and if the money is invoiced from an offshore company and paid offshore then it can be paid gross (and for any contractors out there, IR35 did not apply). Provided the overseas player did not remit the funds to the UK, being a non-dom he escaped liability to UK income tax. The HUGE advantage to clubs here was that you got massively more bang for your bucks. Pay £100k in image rights like this, and the player gets £100k. Pay it as salary and he would need over £169k to get the same net.
And folk wonder how some clubs seemed able to to have such good squads for the supposedly fixed salary cap!"
