VAT compliance is a complex challenge across the football industry. For many clubs, this complexity is amplified by unique income streams, international operations, and intricate staffing structures.
In a recent session on Common VAT Errors in Clubs, Dougie Todd, Co-Head of VAT, outlined the current common problem areas and practical steps clubs can take to mitigate risk, and summarises the key issues clubs should be aware of and guidance on navigating them effectively.
Understanding business vs non business activities
A fundamental challenge for football clubs is correctly distinguishing activities that fall inside the VAT system from those that do not. Clubs often handle a mix of income streams that appear similar but have very different VAT consequences.
For example:
- Grants and subsidies, including government support, central league distributions, insurance receipts, or solidarity payments, often fall entirely outside the scope of VAT, particularly where there is no material benefit provided to the payer.
- Donations may also be outside the scope, provided the club does not offer something of value in return.
- Exempt activities, such as academy education programs, charity fundraising, or interest income, have their own specific VAT rules that affect input tax recovery.
The complexity arises because clubs rarely operate in neatly separated categories. Business, non-business, and exempt activities are often intertwined, making partial exemption positions highly sensitive. Even minor misclassifications can significantly alter the proportion of recoverable VAT.
How partial exemption works
Where football clubs carry out a mix of taxable, exempt and non‑business activities. VAT on costs that relate directly to taxable income is recoverable, while VAT linked to exempt or non‑business activities is blocked.
Shared overheads are first split between business and non‑business use, then only the taxable proportion of the business element can be reclaimed under the partial exemption rules.
This means clubs with academies or community programmes often recover less VAT than expected, making the calculation and supporting evidence critical.
International complexity: eCommerce, streaming, and cross-border supplies
Modern clubs increasingly operate on an international scale, which introduces additional VAT risks. Selling merchandise overseas, streaming matches, offering digital subscriptions, and trading with global fans may seem straightforward commercially but carry significant VAT implications.
Merchandise:
- Cross-border goods movement triggers tariffs, customs duties, and local VAT obligations.
- Recent EU VAT changes have increased compliance requirements, and clubs may need to register for VAT in certain jurisdictions, particularly when using marketplaces or fulfilment centres.
Services:
- Streaming rights, digital content, and cross-border sponsorship arrangements can generate VAT obligations in both the UK and the customer’s country.
- Pricing VAT-inclusive services without considering foreign VAT liabilities may expose clubs to unexpected costs.
Payroll and staffing: unexpected VAT pitfalls
While payroll is not usually associated with VAT, clubs often encounter errors in this area.
Examples include:
- Salary sacrifice schemes: When an employee exchanges salary for benefits (e.g., a car), output VAT may be due. The VAT treatment becomes more complex if the car is leased for private use, potentially limiting input tax recovery or creating exempt supplies. If a business restricts VAT recovery to 50% on the lease cost and accounts for VAT on the full value of the salary sacrifice OR it recovers VAT in full on the lease cost but doesn’t account for VAT on the salary recharge, the VAT accounting is incorrect and they may be able to recover some VAT from HMRC.
- Internal recharges and secondments: Salary recharges between group entities, especially in complex structures involving academies or charitable arms, are frequently misapplied. Even when charged at cost, these may still be subject to VAT.
- Contractors and agents: Coaches, scouts, media professionals, and agent fees often require careful documentation to ensure VAT compliance.
Given that staffing represents a substantial proportion of club expenditure, errors in VAT treatment here can have significant financial implications.
Bringing it all together
The overarching message is clear: VAT in football is manageable, but only with a proactive approach and regular monitoring of change.
Clubs that succeed in minimizing risk are those that:
- Regularly review VAT classifications.
- Understand how commercial activities interact with VAT obligations.
- Incorporate VAT considerations into staffing and contractual arrangements, rather than treating them as an afterthought.
Get in touch
VAT risk rarely sits in isolation – it’s part of a wider tax landscape that demands strategic oversight. Haysmac’s tax specialists, provide senior-level tax leadership to help clubs identify risks early, navigate complexity, and plan with confidence. If your organisation would benefit from embedded tax expertise without the cost of a full-time Head of Tax, speak to our team to arrange an initial discussion.
