Image rights contracts in football have come a long way since a legal battle in the year 2000
between HMRC, Britain’s tax collecting body, and a famous Premier League club and two of its star
players. The issues at stake were deemed so sensitive, even controversial, that the
club was known for years in all legal paperwork merely as ‘Sports Club’, while the two players
were anonymised as ‘Evelyn’ and ‘Jocelyn’. Evelyn and Jocelyn, or Dennis Bergkamp and David Platt,
both joined Sports Club, or Arsenal, from Serie A clubs in the summer of 1995, moving
to Highbury from Internazionale and Sampdoria respectively. Serie A’s footballers were the
highest paid in the world throughout the 1990s and there were structures in place in Italy where they
were rewarded not just with playing contracts for their on-field activities, but image rights deals,
to pay them for commercial deals their clubs struck to monetise their popularity. If
a club could earn X million lira from a sponsorship or partnership with a firm willing to
pay because a star name would help them flog their product, the Italian system had the wherewithal
to pay them separately for that - and tax them differently. Thus when Bergkamp and Platt arrived
at Arsenal in summer 1995, they did so already owning image rights companies - or IRCs - into
which their image rights income was processed. Their Arsenal income from their playing contracts
was taxed at source in the normal way, at PAYE income tax rates, but their IRC money - they and
Arsenal argued - should be subject to a different, and lower, corporation tax rate. HMRC didn’t like
this. It wasn’t how things were done in Britain at the time and there was a difference of opinion
over tax bills, starting a dispute that led to a three-year legal tussle. The case concluded in
2000, with special commissioners accepting that image rights income was legitimately
separate from playing income, creating a legal precedent which remains to this day.
But image rights controversies have continued to rage in the two decades since,
in Britain and elsewhere. Some cases have ended in fines and even prison sentences.
Other image rights issues have scuppered transfer deals, and led to arguments over
who can and can’t be portrayed in computer games. The salient point from Sports Club v HMRC
was that the concept of image rights as legitimate in football was enshrined in British law
from 2000 onwards. The commercialism of football has risen exponentially since,
with clubs using every opportunity to make the next buck - aided and abetted by their influencer
stars - so image rights have become ever more important. In 2000, the Premier League’s clubs
had combined annual commercial revenue of £180m. By 2020 that was £1.8 billion.
For much of the period between 2000 and 2015, HMRC was scrambling between football clubs
trying to clamp down on exploitation of the principle of image rights.
Tax inspectors working in this area say there were cases when large chunks of a player’s pay were
being paid to an IRC, saving the player income tax and his club National Insurance contributions.
Clubs don’t pay NICs on payment to IRCs.
There were cases when it was risible to suggest a player’s image rights were worth much at
all - for example a young reserve at a lower league club - but some clubs were trying. For
the avoidance of doubt, image in an ‘image rights' sense means not just the exploitation of player’s
name or nickname or fame or photograph or likeness, but anything associated with him.
This could range from his signature and voice to any virtual or electronic portrayal,
to his reputation (as a grafter, or joker, or hardman, or whatever),
or indeed any other characteristic from his shirt number to his goal celebration.
If a commercial entity can sell something by making a link between a footballer and
an object or product, then a player’s image rights have real world value. And
when a player has an IRC, the natural and necessary step when he transfers from one
club to another, is for his new club to negotiate a deal with the player’s IRC
for his image rights, as well as with the player himself for his footballing abilities. It is
common practice now for an image rights deal to be agreed first, and then a playing contract.
There are feasibly tougher negotiations to be had between a potential signing and a new club over
image rights, and what endorsements the player must forego so as not to compete with an existing
club sponsor than how many hundreds of thousands of pounds per week he wants. In summer 2019,
Tottenham appeared to be on the verge of signing the Argentinean forward Paulo Dybala
from Juventus. But Dybala had sold his image rights to a third-party marketing company,
‘Star Image’, based in Malta, who had allowed his image to be used,
highly lucratively, to promote brands from Samsung and Gatorade to Monster and Adidas, among others.
Star Image reportedly wanted £14m from Spurs for the player’s image rights, and when such rights
are typically worth low single-digit millions per year, it was a deal-breaker for Tottenham. In
2016, image rights issues delayed the appointment of Jose Mourinho as the manager of Manchester
United. Chelsea, where Mourinho had last worked, up to December 2015, still owned the intellectual
property of Mourinho’s name and signature, having registered both as European trademarks in 2005,
meaning they could use both to sell all kinds of merchandise, from aftershave to jewellery.
By the time of Mourinho’s rights hiccup and well before Dybala’s non-move to Spurs,
HMRC had, in 2015, finally come to a kind of rapprochement with Premier League clubs
over madcap attempts to use image rights to dodge tax. A ‘two cap protocol’ was agreed,
involving a club cap that set a maximum figure any club could pay in image rights, and a player cap
that set a maximum figure any player could earn in image rights. The club cap was set at 15%
of all commercial income. So, if a club had £100m from all sponsorships and partnerships combined,
their players could collectively earn £15m a year in image rights. If it was £200m, then £30m, and
so on. The player cap stipulated that a maximum of 20% of a player’s earnings from the club could be
paid in image rights. So if a player was going to earn £5m per year overall from the club, a
maximum of £1m would be in image rights. The main issue for HMRC is the differing rates of tax paid
on playing contracts via PAYE playing earnings, where the top rate is 45%, and the rate paid on
IRC income, which is corporation tax of 19%. The HMRC protocol always allowed for exceptions to the
rule, but was abolished in 2017, when new guidance along similar but different lines was issued by
HMRC. These in turn have resulted in a new uptick in HMRC investigations into image rights deals. By
summer 2020, HMRC investigations into footballers had nearly trebled to 246 from 87 a year before.
But Britain is far from alone in trying to deal with these issues,
with Spain’s tax authorities notably involved in high-profile action. In summer 2016,
Lionel Messi was given a 21-month prison sentence for tax fraud after a judgement he had evaded more
than €4m in tax on image rights. In 2018, Alexis Sanchez, then a Manchester United player, accepted
a prison sentence for similar tax fraud. Neither player actually served any jail time. Messi and
Sanchez’s fellow superstars Zlatan Ibrahimović and Gareth Bale both got involved in their own image
rights controversy in November 2020, although they were claiming to be wronged rather than
wrong-doers. Ibrahimović tweeted: “Who gave FIFA EA Sport permission to use my name and face?”.
This was a reference to the fact that his name and image appear in the world’s most popular
football computer game, FIFA from EA Sports. He copied the global football union Fifpro into his,
saying he never gave permission to either FIFA (football’s world governing body) or Fifpro to use
his image. “Somebody is making profit on my name and face without any agreement all these years,”
he added. “Time to investigate”. Other players, including Bale, then back at Tottenham on loan,
responded with support, including the hashtag #TimeToInvestigate”. In fact, EA Sports had
acquired the rights to use 17,000 players’ names and images via a range of contracts with Fifpro,
and with individual clubs (including Ibrahimović’s Milan)
and leagues (including the Premier League, where Bale was playing for Tottenham). But
in a dispute not settled even by late 2021, debates continue over whether clubs and leagues
do in fact have the right to sell-on individual player image rights to third parties. Don’t
expect complete clarity before any transfer window of the near future, where contract negotiations
will be underway that are much more complex than how much a player will be paid for kicking a ball.