Taxation of image rights: contracts and commerciality

Amid the ever-changing landscape of commercialised social media, image rights are increasingly frequently at the centre of tax investigations, particularly in the sports sector. The consequences of falling foul of image rights ‘rules’ are high: not only must tax liabilities, penalties and interest be paid to HMRC, but sports clubs and players may also have contravened professional sports body regulations. While these ‘rules’ are not crystal clear, sports clubs should at the very least review and revise their arrangements to ensure distinctions of substance between employment contracts and image rights contracts, with valuations of image rights correlated to commercial returns. When implementing image rights contracts, employers must make concerted efforts to demonstrate the underlying commerciality of the arrangement by monitoring ongoing activities.