HMRC crackdown on R&D tax fraud sees probes into 33 football clubs
Lawyers have said it’s “no surprise that HMRC has significantly increased its scrutiny” on football clubs after authorities opened investigations into several professional clubs relating to a tax relief scheme.
The tax agency confirmed to The Times that it has opened 33 inquiries into claims for research and development (R&D) tax relief made by professional football clubs.
In a freedom of information request (FOI), the tax agency said that the total value being claimed by professional football clubs within these open inquiries is £17.4m.
However, the agency did not disclose the identities of those 33 football clubs within its scope.
The R&D tax relief was introduced in 2000 for small and medium enterprises (SMEs) in response to evidence at the time that the UK was falling behind its competitors.
According to the HMRC, the number of R&D claims has risen year-on-year. Between 2015 and 2016, there were 43,665, totalling £4bn. The agency forecasts the cost of relief for allegations received in 2027-2028 to total £9.5bn.
As Adam Craggs, head of tax disputes, regulatory and financial crime at RPC, explained, “R&D tax reliefs are designed to support businesses undertaking innovative projects in science and technology. As such, HMRC’s focus on claims by companies not seen as traditionally associated with these sectors – such as football clubs – is perhaps not that surprising.”
Sport is more business-focused
However, as the business of professional sports has evolved, so too have its investment portfolios.
Craggs pointed out, “Modern football clubs invest heavily in areas such as sports science, data analytics, and performance technology, all of which can involve genuine innovation”, adding, “Where such activity meets the criteria for R&D, there is no reason, in principle, why football clubs should be excluded from accessing R&D relief.”
“Premier League football clubs are sophisticated commercial enterprises where marginal performance improvements can mean revenue differences of 100s of millions of pounds,” says Thomas Hayden, R&D director at accountancy firm Moore Kingston Smith.
He added, “Substantial investment in R&D, and the tax breaks that go with it, is fair and economically necessary for these top-tier clubs.”
“Given the football industry contributes billions to the UK economy every year, it is important that innovation in the sector is encouraged, not stifled,” Craggs highlighted.
Hayden added, “Claims for significant R&D expenditure by lower-division clubs may warrant HMRC scrutiny, given their financial constraints and operational scale.”
As revealed last July, at least 21 professional football clubs in the UK fell into arrears with HMRC over corporation tax or VAT, many of whom were from lower leagues.
The tax agency has had a focus on football clubs over the last few years. Last August, it was revealed that HMRC collected over £384m in unpaid taxes from the past five years.