Premier League clubs, like all businesses, use various processes to stay competitive, such as optimizing taxation and maximizing profits.
On the 150 million pounds of profits last season, the clubs paid 3 million in taxes, which amounts to a rate of 2% due to efficient tax optimization measures. Five clubs, including Manchester United, Newcastle and Tottenham even managed to pay no taxes to the British tax bill, while recording a total profit of 70 million.
How do they do it?
Two ways – among others – have made this tax optimization possible: the donation and the deferral of profits.
The clubs make regular donations to improve their image and reduce the profits they must declare. The club of Tottenham, who had made a profit of 670,000 pounds, paid no corporate tax by donating 500,000 pounds to its foundation.
Some years, it may happen that the clubs experience a significant deficit, even though they may be profitable the following year. This deficit can be carried over and deducted from taxes the following year. Blackpool has used this method. It paid only 100,000 pounds of taxes this season, despite 21 million pounds of recorded profits (at a tax rate of 0.5%), due to the deferral of 6.7 million pounds of losses from the previous year when the club was relegated.
British public authorities encourage tax optimization
The public authorities and the British legislation encourage Premier League clubs in this practice. In addition to the various exemptions, subsidies granted to foreign purchasers of clubs and tax-deductible transfers, the British government also reduced corporate tax from 28 to 23% between 2010 and 2013.
The United Kingdom understands that promoting tax optimization enables Premier League clubs to be real engines of the country’s economic growth and of its image by obtaining excellent results in the competitions.
Not only does the Premier League contribute a billion pounds each year through VAT, social charges and other taxes, but football – as a “dream” industry – is also a symbol of national prestige. That is why the British State is striving to help the Premier League clubs remain competitive.
London therefore continues to offer a favorable environment for companies to optimize their taxation.