The tax man is probing the financial affairs of 180 football stars at 51 English Premier League and Football League clubs in an inquiry aimed at uncovering alleged tax dodging.
The net also extends to 21 soccer agents who aid players with their finances and negotiate their contracts.
HM Revenue & Customs has fielded a huge team to tackle how many players earn money from their image rights.
The tax authority has recovered £300 million from similar inquiries in the past two years.
The investigation is focussed on limited companies set up by players to manage their image rights.
Although HMRC has not revealed who the players under scrutiny are, 25 of 27 recent England internationals have companies listed under their names.
What are soccer image rights?
Clubs pay their stars for turning out on the pitch but have separate contracts with other businesses who want to associate players with their brands.
A player’s image includes his name, nicknames, likeness, image, signature, autograph, initials, statements, endorsement, and voice.
If the player has an image rights company, the club and associated businesses pay the company a fee to licence rights over his image.
How do image rights avoid tax?
Company profits are taxed at 20% – which drops to 18% by 2020 – rather than the 45% income tax a soccer player will pay on wages of over £150,000. The player can then draw the money as dividends in future years when his playing career has ended at a lower rate of income tax.
Players and their clubs also make a significant saving on national insurance contributions.
One football lawyerreckons a club can save almost £200,000 on tax for a player who earns £1.8 million by agreeing to pay image rights.
What is the HMRC action about?
HMRC agreed to cap image rights payments – the maximum payment to image rights companies cannot exceed 15% of commercial income and image rights payments cannot be more than 20% of a player’s wages each year.
HMRC suspects some clubs and players have broken these rules and pay up to 60% of salaries as image rights.