'Is this just another nail in the coffin of PREM clubs?': Budget bombshell

Chancellor of the Exchequer Rachel Reeves could have just made it even harder for Gallagher PREM clubs to compete with Top 14 clubs at the top end of the transfer market.

PREM clubs already find it hard enough to sign the best foreign talent, but could now find it even more difficult after finding significant changes to the way image rights payments are taxed hidden away in last week’s budget.

HM Treasury is seeking to raise an extra £40 million a year, mainly from football, by making all image rights payments subject to income tax and both employer and employee National Insurance Contributions (NICs) from April 2027.

Under the current system, clubs contract a player’s image rights company for commercial services, which are excluded from PAYE (45 per cent) & NIC (two per cent), but instead the companies pay corporation tax of between 20-25 per cent.

PREM clubs could face huge bills. With employer NICs currently at 15 per cent, they are now free of the tax charge and may have to pay more on ‘net’ contracts to compensate for higher tax burdens.

“They have thrown out a little hand grenade. Typically, in rugby, you work on 20 per cent image rights unless you are Jonny Wilkinson or Dan Carter,” a source told RugbyPass

“What many players do is they build it up as a pot, then when they are in a low tax position, you distribute it as you would a dividend from a company.

“The impact on rugby will be more significant because rugby doesn’t have the coffers to pay 15 per cent more.

“Take, say, Charles Piutau: when he signed for Bristol Bears, that deal included a 20 per cent image rights payment. So let’s say the deal was worth £1m and 20 per cent was image rights, not through employment. So now if I want that gross £1m, I have to make the contract worth £1.2m to cover that loss.

“We are already having this push-pull with the Top 14 because we cannot compete financially. Is this just another nail in the coffin of the PREM clubs who are going to struggle to attract big-name players?”