IR25

9 March 1999

FOOTBALL CLUBS TO GET HELP WITH NEW ACCOUNTING STANDARD

A measure to help football adjust to new accounting rules issued by
the Accounting Standards Board was announced by the Chancellor today.

The measure will ensure that the new rules - which cover the cost of
intangible assets such as players - do not have adverse tax effects
for football clubs.

DETAILS

1. A new accounting standard for intangible assets applies for
accounting periods ending after 22 December 1998 (Financial Reporting
Standard 10). This will not normally affect overall tax bills but it
can advance the timing of payment.

2. The change is of particular importance to association football
clubs in relation to sums paid for players. The rights to a player's
service is an intangible asset of his club and so lump sums paid to
obtain those services are affected.

3. In the past these sums were usually charged to clubs' profit and
loss accounts in the year they were due. This treatment was followed
for tax. FRS 10 now requires the cost to be spread over the life of
each player's contract. The Revenue will, again, follow the
accounting treatment for future payments so that tax relief is given
later than in the past. The proposal does not affect this.

4. The proposal operates for the period in which FRS 10 first
applies. Here the unexpired portion of sums paid for existing
players' contracts (the part relating to the remainder of their
contracts) has to be transferred to the balance sheet. That cost is
then amortised; that is, written off to the profit and loss account
over the remainder of each player's contract (or his playing career
with the club if that is shorter because of, say, injury). The costs
which are transferred to the balance sheet are taxable under present
law and the later amortisation deductions are allowable.

5. This process advances tax bills rather than creating new ones.
Hence the proposal will ease the transition for association football
clubs by preserving the tax treatment already given for existing
players before FRS 10 applied.

NOTES FOR EDITORS

1. Financial Reporting Standard 10 dealing with intangible assets was
issued in December 1997 and applies to accounting periods ending
after 22 December 1998. Most football clubs draw up accounts for the
playing season and so their current accounting years end in May, June
or July.

2. Accounting standards are issued by the Accounting Standards Board,
which is an independent body concerned with the development of
accounting standards.

INLAND REVENUE PRESS OFFICE
Media enquiries to:      0171 438 6692/6706/7327
(Out of hours: 0860 359544)

Non-media enquiries to:  0171 438 6420/6425
(Office hours only)

Inland Revenue information is on the Internet:
www.inlandrevenue.gov.uk

# = pounds sterling