beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Employment Income Manual

Employment income: general: payments for “image rights”: Sports Club: issues

Charge to tax as employment income

Evelyn and Jocelyn (the players) each entered into service agreements (the players’ agreements) with Sports Club. It was common ground that the salaries paid under the players’ agreements were earnings from that employment. Sports Club also entered into agreements with both IRC under which the IRC agreed to supply to Sports Club certain promotional services of the players in return for fees paid by Sports Club to the IRC.

The issues considered by the Special Commissioners (relevant to this guidance) included:

  1. whether the payments made by Sports Club to the IRC under the promotional agreements were earnings from the employments of Evelyn and Jocelyn respectively and so chargeable to income tax as employment income; or
  2. if the payments were not earnings from the employment, whether they were benefits in kind and so fell to be treated as earnings from the employment.

With regard to issue 1, the Special Commissioners identified the following questions.

a. Did the promotional agreements have independent values?
b. Were the promotional agreements a “smokescreen” for additional remuneration?
c. Were the payments under the agreements emoluments from the employments?


On the basis of the evidence presented to them, including from a number of witnesses, the Special Commissioners found as fact that Sports Club did not recoup from the exploitation of the players’ images the moneys which it paid under the promotional agreements. However, they found that when Sports Club entered into the promotional agreements they expected to exploit those rights and to make money from them. The Special Commissioners also found that Sports Club obtained the negative value of the agreements of being able to control the activities of the players restricting time spent away from their sporting activity.

On issue 1, the Special Commissioners concluded that Evelyn and Jocelyn were “established stars” and therefore capable of earning very substantial sums each year from commercial contracts. Critically, the promotional agreements were agreements to provide promotional services, capable of having (and did have) independent values. They were genuine commercial agreements which the parties could seek to enforce. Consequently, in the light of the particular facts of the appeal, the payments made by Sports Club under the promotional agreements were not earnings from the employment with Sports Club of Evelyn or Jocelyn.

On issue 2, the Special Commissioners held that “benefit” (within the meaning of the relevant legislation) must exclude anything provided in return for good consideration under a separate commercial contract. Consequently, the payments under the promotional agreements were not benefits in kind within the meaning of the legislation and so should not be treated as earnings of the employment of Evelyn or Jocelyn.