How can the UK Premier League help the coronavirus cause?

7 April 2020 | Applicable law: England and Wales

As the coronavirus pandemic continues to affect all aspects of daily life with no certain end in sight, the Premier League clubs acknowledged at a shareholders' meeting on 3 April that the current season would not be able to resume in May as hoped, and that any return to play will only occur "when it is safe and appropriate".

More contentiously, the Premier League also called on its players to take a 30% cut to their annual pay in order to "protect employment throughout the professional game". Players have come under increased pressure to give up a part of their salary in light of the crisis, with health secretary Matt Hancock asking top footballers to “take a cut and play their part”. However, the Professional Footballers' Association (PFA) has resisted this on the basis that this would simply just take tax pounds away from the NHS. Are they right? If so, is there a more effective way for footballers and football clubs to 'play their part' in the response to the current crisis? Given that the issue has become politicised, and with growing concern from players and clubs alike, how can this desire to contribute to the frontline NHS workers be best channelled?

What happens if the players just give up some of their salary?

First, let us consider the consequences of players simply giving up 30% of their salary. On a salary of £100,000 per week (not far above the average Premier League weekly wage of £61,024), a 30% cut would indeed result in around £18,240 less income tax and NICs paid by football clubs to HMRC. Of course, football clubs could use this saving to avoid relying on the Government's furlough scheme, thereby decreasing the burden on HMRC – after all, this is how one would interpret the Premier League's justification for its proposal.

However, this does not seem to be playing out in practice, with a number of clubs declaring (amidst criticism) that they will take advantage of the scheme without first having reached an agreement on player pay cuts (although Liverpool have now reversed this decision). It would therefore seem that, absent a commitment by clubs to use the amounts for a good cause, a simple pay cut would leave football clubs with more money and HMRC with significantly less. There is clearly little benefit to society in such a move and the PFA has highlighted that this could lead to a reduction in tax for HMRC of £200m. There will be some clubs for whom this money is essential for survival in very difficult times, but there will be other, better funded clubs that have no immediate urgent need for these sums.

What about donations from a player's net salary?

An alternative approach would be for players to be paid their usual salary, with the recommendation that they donate 30% of their wage to a charity that supports the NHS. Jordan Henderson, the Liverpool captain, has been behind a drive to create a coronavirus fund that allows help to be given to frontline NHS workers. The effect of this would be twofold. Firstly, there is no tax loss for HMRC: on the weekly salary of £100,000, the full £60,800 income tax and NICs would be paid by the club and the player. Secondly, there would be the additional donation of 30% of the player's net wages (£15,900) to charity. The charity would also be able to claim Gift Aid, which would increase the donation to £19,875 (the player would be eligible for a tax relief of 25% of this amount). This approach would make most sense if the objective is for players to donate to charity while leaving the amount of employment-related tax unchanged. However, this may be harder to justify from the clubs' perspective, as they would still be faced with the full payment of their players' salaries (often a club's biggest cost) without reaping the PR benefits of making a donation themselves and without any cost saving which may be necessary for some clubs.

Could the club make a donation?

A compromise, perhaps, would be for players to support the club's decision to reduce wages by 30% and for the club to commit to donating that amount directly to a charity that supports the NHS. Assuming this is the club's decision (and not a condition imposed by players, which may lead HMRC to tax the amount as an employment-related benefit), the club could donate the full amount directly to charity in a tax-efficient manner (the donation would be a valid deduction for corporate tax purposes, although player salaries are also deductible against corporation tax). The advantage of this is that the amount of the charity donation is maximised: using the same weekly salary of £100,000, the full £30,000 would go directly to where it is perhaps currently most needed, although there is a reduction in the amount that goes to HMRC in corporation tax. In addition, both the players and the clubs would share the credit of having 'played their part'. A variation to this approach would be for the club to set up a Payroll Giving scheme, so that the donation is withheld automatically from players' gross salaries before tax (but after National Insurance) deductions through the usual PAYE system.

Clearly, players, clubs and the PFA should put thought into what they would like to achieve with the proposed salary cuts. If their objective is to show they are contributing to the country's response to the coronavirus pandemic, the current proposal of simply reducing players' wages without any further commitments from the clubs as to how that money will be spent is unlikely to prove a winning strategy.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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