It is reported that HMRC is taking a keen interest in the tax planning schemes of some of some UK based footballers and sports stars. What is interesting is whether IR35 will apply in these cases.

Footballers, like other sporting stars have been encouraged to pass the income that derives from their image rights through specially set up companies. This way they can avoid paying tax on the sums as employment income.

If the sums were received as employment income the footballers would face an additional tax bill, although the amount of any tax saving depends on the marginal rate of tax which applies to the company (see Salary v dividend). The main benefactor of many of these arrangements must therefore be the clubs, who are avoiding employers NICs.

The type of income that this applies to will be in respect of merchandising, sponsorship and appearance fees. HMRC will say that this income accrues by virtue of the footballer's employment with the club. The footballer's advisers will surely argue that this income accues by virtue of the players own talents.