Mutterings of a Fool

Man, Dad, Runner, Chief dog walker

Do you pay VAT when buying footballers?

For those who missed it or who simply couldn’t care less about football, on Monday the transfer window closed for the English Premier League. After a very quiet January the final day turned out to be a little bit more exciting. Liverpool and Chelsea spent £134m on 4 players and in the process smashed the domestic transfer record.

Now in anyones book (Abramovich aside perhaps) that’s some pretty major spending and it got me thinking, does a football club pay VAT (or any other taxes) when they buy a player? They are in essence a product after all that is added to the machine that is a football team in order to win money for good performances and attract supporters to increase the sale of tickets. If they do then the extra 2.5% added on January 1st has got to be painful! That would mean paying £26.8m rather than £23.5m that they would have paid last year. No doubt Abramovich probably has the extra £3m down the back of his sofa, but a good day for the Treasury’s coffers perhaps?

The obvious reaction to these transfers is one of horror and I’ve heard many cries of ‘it’s scandalous’ or ‘in these times of austerity…’. But is it really so bad? The people who own these 2 clubs like many others are very wealthy individuals, if they don’t spend their money on buying players they’ll just buy a bigger yacht instead. Wouldn’t we rather the spent this money in the UK where we can benefit from the taxes from the club and the many linked industries not to mention the increased interest from tourists etc?

In the same week that this happened the government announced changes to the income threshold for when the higher tax rate kicks in, according to the Institute of Fiscal Studies this will mean that the average household will be £200 worse off per year. If we assume that my assumption on VAT is correct (I’m sure it’s not but it’s my blog so I make the rules) the VAT from the sales of these 4 players could offset the impact to 134 thousand households. A good deal in my book.

So in conclusion this fool is suggesting we encourage as many and as expensive as possible transfers. Lets give some incentives for these rich idiots business men to spend their not so hard earned cash and with the money cancel the tax rate rise.

P.S. If you happen to know the actual tax implications of these sales I’d love to hear it.

3 Comments

  1. Wow – Mr Salmon would be proud!

  2. My understanding is that ‘buying a player’ is a misnomer. Players are contracted by the club that has them, for a set period of time. If another club wants to have a player who is still under contract they have to pay the club as technically it’s Breach of Contract. So the buying club isn’t really buying the player: it’s paying the selling club to agree to break their contract with him. Hence no VAT. Which is why when a player is ‘out of contract’ they can move clubs for no fee: a ‘free transfer’.

    Well, you did ask..

    • well thanks for ruining my point 🙂
      I’m sure you’re right though, I guess the headlines wouldn’t be so interesting if they said Chelsea paid Liverpool £70m to buy out Torres contract.

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