HMRC intensifies investigations on Research & Development (R&D) tax fraud within football clubs, focusing on 33 clubs under scrutiny.
HM Revenue & Customs (HMRC) has intensified its examination of football clubs following the initiation of probes into multiple professional teams concerning a tax relief scheme.
The tax agency confirmed to The Times that they have launched 33 inquiries into Research and Development (R&D) tax relief claims made by football clubs. The cumulative value of these claims under scrutiny amounts to £17.4m, as stated in a freedom of information request (FOI) submitted to the agency. Despite disclosing the number of clubs, HMRC withheld their identities.
In response, Adam Craggs, head of tax disputes, regulatory, and financial crime at RPC, stated that it is not surprising to see HMRC's increased focus on claims by companies perceived as unconventional R&D candidates, such as football clubs. This remark follows the evolution of professional sports investments toward sectors like sports science, data analytics, and performance technology, where genuine innovation can be noted.
Craggs also emphasized that, where such endeavors meet the criteria for research and development, there should be no objection to football clubs leveraging R&D relief. Thomas Hayden, R&D director at accountancy firm Moore Kingston Smith, supported this viewpoint, arguing that significant R&D investment is essential for premier league clubs, given the potential revenue implications of marginal performance improvements.
However, Hayden further stated that claims for substantial R&D expenditure by lower-division clubs may warrant HMRC scrutiny, considering their financial limitations and operational scale.
Last year, reports indicated that at least 21 professional football clubs in the UK were indebted to HMRC for unpaid corporation tax or VAT, with many hailing from lower leagues. Over the last few years, HMRC has shown interest in recovering unpaid taxes from football clubs, with collections amounting to more than £384m over the past five years ending in August 2021. The tax relief scheme in discussion was introduced in 2000 to support small and medium enterprises (SMEs), with claims reportedly increasing from 43,665 (totaling £4bn) in 2015-2016 to an anticipated £9.5bn in 2027-2028.
Notably, several premier league clubs, such as Chelsea, Fulham, Nottingham Forest, and Brentford, have benefited from R&D tax relief, with Brentford claiming over £3m based on around £16m spent on R&D activities that included hiring PhD students and authoring academic papers. These clubs, along with 29 others, are part of a broader investigation into potential exploitation of the tax scheme.
- Despite the increasing focus of HMRC on claims for Research and Development (R&D) tax relief by football clubs, Adam Craggs suggests that it's not surprising as professional sports have shifted investments towards sectors like sports science, data analytics, and performance technology, where genuine innovation can be noted.
- Thomas Hayden, R&D director at accountancy firm Moore Kingston Smith, argues that significant R&D investment is essential for premier league clubs, given the potential revenue implications of marginal performance improvements.
- However, Hayden also cautions that claims for substantial R&D expenditure by lower-division clubs may warrant HMRC scrutiny, considering their financial limitations and operational scale.
- Last year, it was reported that at least 21 professional football clubs in the UK were indebted to HMRC for unpaid corporation tax or VAT, with many hailing from lower leagues, highlighting the lingering issues with tax payments in the football industry.
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