HMRC handicaps sporting events
Can the UK survive as a major player in international sporting events without changes to the way events and competitors are taxed, asks Stephen Dunham of Dunham Consulting.
As the UK prepares to host the 2012 Olympic and Paralympic Games, the long-term ability to compete to host major sporting events continues to be undermined by HMRC’s attitude and strategy to the taxation of the organisers and competitors at these events.
The danger is that the UK will be seen as “closed for sport”, deterring organisers from wanting to consider the UK as a location for their event and prompting athletes to question whether participation in an event staged in the UK should be included in their schedule.
The impact of losing or not being able to attract the world’s best events and athletes to the UK needs to be measured in more than pure economic terms alone. The recent enquiry by the Riots, Communities and Victims Panel into last Summer’s riots identified a lack of “belonging to society” as a key factor, especially in the young and sport, more than any other activity, builds bridges, brings together all levels of society and develops a level of inclusion for the benefit of all.
So, how do we find ourselves in this position?
Taking athletes first, the revenue authorities, in line with most other countries, tax non-UK resident competitors on prize money and appearance fees attributable to matches or tournaments held here. However, in addition to this, HMRC also seeks to tax a proportion of an athletes’ global endorsement income following their victory in a tax case against Andre Agassi back in 2006. The only other country that applies the same treatment to worldwide endorsement income is the US. In addition, since their victory, HMRC has significantly changed the way it calculates how much of this endorsement income should be liable to tax. Initially a proportion of overall deals which related to non-playing services (the “image”) was excluded from the UK tax calculation, with the “playing” element simply pro-rated based on time spent in the UK in a particular tax year. However in recent years, HMRC has sought to take a different approach by asserting the whole contract relates to “playing” services and apportioning on the basis of the proportion of the events an athlete takes part in, which has the overall effect of yielding a higher return for HMRC.
The impact of these rules on athlete behaviour has already been seen with Usain Bolt declining to take part in the Aviva London Grand Prix in 2010, Rafael Nadal not taking part in the AEGON Championships at the Queen’s Club and the ATP considering moving the end of season World Tour Finals from London once the deal expires in 2013.
Continued...
The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.
Registration is FREE and allows you to view all content, ask questions, comment and much more.
Or if you are already registered, login here
Sorry, but I don't agree 2 thanks
To place non-resident athletes in the same tax position as UK resident athletes seems pretty fair to me.
Equally, basing the tax upon a proportion of worldwide income from their sport including all of the associated marketing and image rights seems reasonable.
well i dont agree with all of the above 1 thanks
we have had numerous discussions on this matter on aweb recently
some points
it seems inequitous that where a final of a competition that takes place in UK , when the rounds have not , ie Champions League, that the players should be taxed on a share of their annual salary - they would have been paid it in most cases irrespective of whether they reached the final
the Agassi case is wrongly decided - if his global sponsorship by say nike is paid from an amercan company to a us citizen in the us that should be the end of the matter - what is much more germain is the corporation tax on the nike profits in the uk - what should happen is a more rigorous attack on transfer pricing by the multinationals that are sponsoring
if the uk puts tax barriers in the way of athletes etc then the competition is reduced and so would the gate recipts which has a knock on effect on the vat collected.
anyway maybe they should all become resident but non dom - that might help them out or it may not ;-)
sporting events 2 thanks
As a sports fanatic of long standing watching the horrible charade of the 2012 Olympics (passport chaos ! transport chaos ! all the tickets for sponsors ! and the acceptance of the notion of sponsors' brands only !), I can only say that anything that stops the UK hosting such things in future is to be welcomed.