THE HIGH COURT is hearing a VAT appeal brought by Birmingham City Football Club on agents’ fees which could see transfer costs rise if it is rejected, Baker Tilly has warned.
Tribunal judges earlier ruled that Birmingham City could not claim back VAT on 10 transfer deals because the law treated agents as working for the players – despite the club paying the agents’ fees.
“As the agents’ supply was to the players, no input VAT was recoverable by the club despite the fact that the club paid the agents’ fees. This irrecoverable VAT will add a significant cost to transfer deals,” Baker Tilly said.
As the players are employees, payment for a service that they benefit from may also be subject to income tax and NICs as a “benefit in kind”, Baker Tilly warned.
However, this extra tax burden for the players depends on various factors.
“This will not automatically be the case and will depend on the circumstances in which the payment is made and the precise contractual arrangements between club, agent and player, but it is likely to be an issue that HMRC will follow up once the VAT issue is settled,” Baker Tilly added.
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