The Premier League - 10% Transfer Levy

The Premier League - 10% Transfer Levy

The Premier League – 10% Transfer Levy

Shadow sports secretary, Thangam Debbonaire, said that she was “going to look at everything again” when asked recently whether reviving the transfer levy – something which was recommended in a 2021 fan-led review, but which was not taken up by the Conservatives in their version of the bill. This idea has cropped up again after attempts to form a European Super League failed and the issue of financial mismanagement have become prevalent in English football.

However, the notion of a transfer levy has been firmly put to bed by Sir Keir Starmer, after he said that Labour will not introduce a 10% tax on Premier League transfers.

It would suggest that the idea of implementing a transfer levy is no longer on the table as far as the Labour or Conservative Parties are concerned should either take or retain control of government after the General Election in July 2024.

Given this impasse, what are the issues around a transfer levy and what, if any, are the alternatives?

Transfer Levy

The notion of a transfer levy (Levy) was first put forward by the former sports minister Tracey Crouch MP as part of the Government’s fan-led review of football governance. In simple terms, it is “solidarity transfer levy”, which would have taxed transfers (of players) between Premier League clubs and between Premier League clubs and overseas sides, with the money being redistributed further down the football pyramid.

A charge of 10% of the transfer fee would, it is said, have raised approximately £160m over the past five years, which could be redistributed to clubs in the lower leagues.

Issues

Whilst the idea, in principle, sounds like a good way of redistributing money to those clubs down the football pyramid, there are issues with the administration and oversight of the Levy (i.e. who would collect the Levy and ensure it is distributed fairly, is it paid in instalments or dependent on player appearances and so on).

Furthermore, there is also the notion that the Premier League is awash with money. Nevertheless, outside the few bigger clubs, this is not the case, and the imposition of a Levy could actually add to the gap between the wealthy and those trying to survive.

The government previously cited shortcomings in the current model of industry self-regulation as a factor in the case for reform of football. So, what are the alternatives, if any?

Independent Football Regulator

The Football Governance Bill (Bill) passed its first hurdle in the UK parliament, after a second reading debate on 23 April 2024 that demonstrated cross-party support. The Bill will have a major impact on football regulation in England, short and long term, establishing a powerful new independent regulator, the Independent Football Regulator (IFR).

The IFR will have strong powers of enforcement as well as the power to impose a solution in situations where leagues fail to reach an agreement on distribution of revenue to lower leagues from televised matches.

Moreover, the IFR will have broad and sweeping powers including oversight of club owners and new duties are not only imposed on clubs – the five top tier leagues also face new obligations under the Bill. A league would have a duty to notify the IFR if it becomes aware of a risk to the financial soundness of a club or of English football more generally.

Whilst this sounds good in theory, there are still concerns that the implementation of the IFR will still see clubs in the lower echelons of the football pyramid unable to survive given the regulation and reporting criteria required. As a consequence, this would deter prospective buyers and investors going forward.

Financial Distribution

Notwithstanding, the Bill includes new backstop powers around ‘financial distributions’ between the Premier League and the EFL, so that if the two parties continue to fail to agree on a ‘new deal’, the regulator can ensure a settlement is reached.

However, precise details over the point at which the powers would be triggered – and what those powers would look like – have not yet been confirmed. In addition, the scope of financial distributions is unclear and whether this will allow for a fairer distribution of transfer monies down the football pyramid.

The Government has consistently stated that it wishes to support the Premier League’s continued global success. Nonetheless, there is a thin line that needs to be navigated between the continued success of the Premier League (as a world leading competition), with the obligation to support clubs and with it, local communities, further down the football pyramid.

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David Winnie
Partner, Head of Sport
Email:  dwinnie@gilsongray.co.uk

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