Annex 1: Minor Changes in the Law Change 103: Repeal of section 63 of FA 1999: treatment of transfer fees under pre-1999 contracts: Schedule 1
This change concerns the repeal of section 63 of FA 1999.
Section 63 of FA 1999 provides for transitional relief for football and other sports clubs on the introduction of new accounting standards for intangible assets in 1997 and 1998.
Before introduction of the new accounting standards transfer fees etc were charged to the club’s profit and loss account in the year in which they were due. Under the new accounting standards sums paid for players are spread over the life of the player’s contract.
Without section 63 of FA 1999 the value of the unexpired part of an existing contract at the date the new accounting standard is adopted would be transferred to the balance sheet and charged to tax as income. Relief for that amount would then be spread over the remaining life of the contract.
Section 63 of FA 1999 gives transitional relief by providing that for tax purposes the requirements of the new accounting standards can be ignored for any contracts entered into before the beginning of the first accounting period in which the club adopted the new accounting standard.
The new accounting standards are effective for accounting periods ending on or after 23 December 1998. So section 63 of FA 1999 applies only to contracts entered into before 1999.
In most cases a footballer’s contract will last three or four years. Contracts may be shorter in the case of a veteran player or longer in the case of a promising young player. But it is unlikely that any contracts to which section 63 of FA 1999 could apply will still be in force when this Act comes into effect on 6 April 2009. For this reason, section 63 FA 1999 is redundant and can be repealed.
This change has no implications for the amount of income liable to tax or who is liable for tax on it. It affects (in principle but not in practice) only when tax is paid.