Tax advisers to the UK’s professional sports clubs this week applauded a clause in the Finance Bill that will ease the £50m tax burden imposed by a new accounting treatment for transfer fees.
A new accounting standard, FRS 10, introduced in December last year, stated players’ transfer fees should be considered an intangible asset.
Transfer fees paid, it said, should therefore be shown on the club’s balance sheet and then amortised over the player’s contract, rather than being written off immediately.
But the 1998 Finance Act specified prior-year adjustments would also require recalculating the company’s tax computation. Requiring clubs to show multimillion-pound assets on their balance sheets in the current financial year rendered them liable to an extra £50m in tax for the current year, said Deloitte & Touche tax partner Richard Baldwin.
Under the compromise clause agreed with the Football Association – and extended to include other professional sports such as rugby – fees written off against revenues for players who were signed before 22 December 1998, such as Chelsea player manager Gianluca Vialli, will be allowed to stand for tax purposes.
‘It’s a cashflow issue, as it was quite a lot of money for clubs to find,’ said Baldwin.
‘The Inland Revenue is often criticised for making people’s lives more difficult, but on this occasion, they actually did listen.’
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