HMRC has searched the premises of a number of football clubs based in the north east and south east of England as a result of suspected £5m income tax and national insurance fraud. West Ham's London Olympic Stadium and Newcastle's St James' Park were among the locations which saw financial records, computers and mobile phones seized by HMRC on 26 April.

As the raids form part of an ongoing investigation, only limited information has been released by HMRC at this stage. However, in January the Public Accounts Committee highlighted a number of concerns about tax evasion in the football industry.

One area that has been the subject of particular scrutiny is the alleged misuse of image rights to reduce tax liabilities. The term "image rights" refers to an individual's proprietary right in their personality – the right to prevent unauthorised use of their name and other personal attributes or distinguishing characteristics. Current tax rules allow income from image rights to be treated as a separate revenue stream for tax purposes. Members of society whose image has market value have therefore, in certain cases, set up a company to receive payments for those rights as opposed to the relevant income being paid to the person directly. The revenue generated from such rights may in turn be subject to corporation tax rather than income tax (often at the higher or additional rate) and national insurance. Thus, such a structure is potentially capable of generating significant tax savings for many well-known footballers and also their employing clubs who are not required to pay income tax under PAYE or national insurance contributions. The concerns which have been expressed focus on how much remuneration has been awarded as image rights payments.

At present the justification for the raids has yet to be made clear. We will provide further detail and analysis of this issue as information becomes available.

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