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Crackdown on top rate tax loophole

Tax investigators are cracking down on attempts to avoid the new 50p top rate of income tax by reclassifying salary as payments for "image rights", HM Revenue and Customs has confirmed.

The issue emerged as the Sunday Times reported that a number of prominent Premier League footballers had taken advantage of the little-known provision to save millions of pounds in tax.

According to the newspaper, more than 50 players are making a tax saving of 22% by having a proportion of their salary paid through image rights companies, which are liable to corporation tax at 28% rather than income tax at 50%.

And in some cases, it was claimed that players are paying as little as 2% tax by taking money from the image rights companies as loans, which are classed as benefits in kind.

Payments for image rights can be made to people - often high-profile performers or sports personalities - whose physical appearance and name have a commercial value in their own right.

Footballers could earn image rights payments for the use of their pictures on merchandise or their names on replica shirts.

According to the Sunday Times, players have rushed to set up image rights companies in the wake of the introduction of the 50p tax rate on earnings over £150,000 by Chancellor Alistair Darling 18 months ago.

A Revenue and Customs spokesman said: "HMRC are well aware of attempts to use image rights as well as other schemes to avoid the 50p rate of tax.

"The taxation of image rights is a complex area, where the tax treatment will very much depend on the facts of the particular case.

"The Government has made an additional £900 million available to HMRC to ensure the tax rules are respected across the board."

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