West Ham United have risked upsetting a number of their key players after taking the unprecedented step of freezing image‑rights payments. The club have decided to withhold money due to seven of their first-team squad until Her Majesty's Revenue & Customs completes an ongoing investigation into tax due on image-rights contracts, a move that other clubs will view with interest.
The payments, which are typically free of PAYE and National Insurance, and often channelled through an offshore company, have come under increased scrutiny across the Premier League as HMRC seeks to recover up to £60m in unpaid taxes. It is unclear just how much individual clubs would be liable to pay back if the Revenue is able to prove that image rights contracts are a form of remuneration but West Ham are not prepared to wait and find out.
Kieron Dyer, Matthew Upson, Robert Green and Scott Parker are believed to be among those who have received letters informing them that the payments will stop. The decision could be seen as further evidence of West Ham's financial plight but David Sullivan, their chairman, maintains the move is a "logical, common-sense solution to a potential problem".
He said: "Because the Inland Revenue are saying that tax has to be deducted at source, until the people receiving the image rights have clarified things with the Inland Revenue, we are freezing payments on the basis that there has been a backlog of deductions that have not been made. Every penny they are entitled to will be paid in due course, but until it is agreed with the Inland Revenue we can't release the money.
"Until we build up the deficit for the previous payments, the payments will be held in escrow pending a settlement with the Inland Revenue. If anyone wants to sort out their particular case with the Inland Revenue, we'll abide by whatever they say. But what we can't have is a situation where a guy goes back to France and then in two years' time they [HMRC] say to us: 'You've given him £1m in image rights, we want 40% of that.'"
It is understood that the legal and financial representatives of the players have contacted West Ham to contest the decision, which they claim breaches contractual obligations. Sullivan, however, has urged them to deal directly with HMRC. "They can bring it to a head with the Revenue themselves. Their lawyers and their accountants should write to the Inland Revenue and resolve it," said Sullivan, who claimed "people are not particularly disgruntled" despite suggestions to the contrary.
Licensing payments are commonplace in the Premier League and often equate to at least 10% of a player's salary, but Sullivan believes his predecessors were too quick to approve image-rights contracts. "The previous board have been irresponsible in the way they have paid it and we are immediately reversing things in a fair and reasonable way," he said. "We are not doing anything tricky. We are just trying to limit our exposure for any punitive back-tax."
