Tax dodge has Premier League players raking in the cash

Premier League stars are using a legal loophole that cuts their liability to two per cent on massive chunks of their income.

Premier League stars are using a legal loophole that cuts their liability to two per cent on massive chunks of their income.

The Sunday Times and Daily Mirror claim that Wayne Rooney saved £598,000 by channelling his image rights payments to a company he owned - then borrowing the money back from the firm as a directors' loan. Gareth Barry is another using the scheme, with the Manchester City player having saved some £135,000.

The loophole depends on footballers having two separate contracts with their clubs, one for playing football and the other for their image rights - typically income from replica shirt sales and other merchandise. Those payments are put into private companies, with players then able to take loans from the company that are liable to tax at just two per cent - compared with the current 50 per cent tax rate for top earners.

Rooney has borrowed £1.6m from his company over the past two years, paying £25,511 in tax instead of the £622,802 which would have been due under the 40 per cent top rate of income tax rules at the time.

The Sunday Times report claims that players can pay back the loans when tax rates are lower, or potentially even "collapse" the companies at the end of their careers and thus avoid ever paying income tax.

Other players who receive substantial portions of their wages as image rights include Ashley Cole, Michael Owen, David James and Theo Walcott, though they have not taken loans out. Even so, the corporation tax payable by the image rights companies is 28 per cent rather than 50 per cent, offering huge tax savings.

"HMRC are well aware of attempts to use image rights as well as other schemes to avoid the 50% rate of tax," an HMRC spokesman said.

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