Simon Sweetman, who on other days edits the Journal of the Association of Cricket Statisticians and Historians (www.acscricket.com [1]), wonders whether tax matters came into a recent decision….
The Indian Premier League will not be played in England this year for what seem like very good reasons (it’s too cold and wet in April, the pitches will not help fast scoring, the timings demanded by TV are all wrong, and there is considerable tobacco sponsorship involved). However, the papers say, if the tournament had been held in England the players might also have been “hit in the pocket by huge tax demands” on their earnings from endorsements. According to press reports, lawyers (which lawyers ? how much did they charge for saying it ?) said they could be taxed at the top rate, even on money earned outside the UK. This intrigued me as a simple chap and I thought I’d poke it around a bit.
Now this probably refers, I thought, to the potential earnings by Andrew Flintoff and Kevin Pietersen from the IPL, given that the British press is hardly interested in Mahendra Singh Dhoni’s tax bill. And, I thought, their cases may in fact be different, since Flintoff is presumably of UK domicile, while Pietersen at first thought might not be.
But then domicile is an odd concept. Surely one can argue that if you choose to represent a country’s national team (with or without extravagant badge kissing) that represents the adoption of a domicile of choice ?
Be that as it may, life is of course much more complicated than that. So we go to ITTOIA 2005, s.13 –
(1) This section applies if an entertainer, sportsman or sportswoman of a prescribed description (a "performer")—
(a) is non-UK resident in a tax year, and
(b) performs a relevant activity in the United Kingdom in the tax year.
(2) If a payment or transfer connected with the relevant activity is made, the performer is treated for income tax purposes as performing the relevant activity in the course of a trade, profession or vocation carried on in the United Kingdom.
(3) It does not matter whether the payment or transfer is made to the performer or anyone else.
And you then have to look for and tax the “relevant proportion” of the earnings as income. Obviously anything that contains the word “relevant” quite so often is great fun for the courts.
So far all the cases (the Agassi case and two others subsequently heard by the Special Commissioners) have involved non-resident and non-domiciled tennis players, with the point at issue being the extent to which sponsorship payments made to companies on behalf of the sportsman should be added. It was found that a proportion of this income was taxable even where neither payer nor payee was resident in the UK, and that the proportion is based on the ratio of the days actively involved in the UK and the total days actively involved worldwide. A pity they haven’t looked at cricket, what with days spent in the pavilion watching your opening pair put on 280 or watching the rain come down – is that active involvement ?
However, this does not apply
Which might of course apply to UK based cricketers, though one wonders about the higher earning ones who have central contracts : these are described here and there as “employment contracts” but I doubt if it is as straightforward as that – even 20 years ago international cricketers were using limited companies and some of them doubtless now have more exotic structures. And it might be relevant here that the ECB refused to let the players’ representatives get involved in the negotiations.
Having worked our way through this it then occurs – since this kind of legislation is now standard, whether South Africa does not do this ? Well, indeed it does, but it levies only a 15% withholding tax on monies earned in South Africa. And that will clearly be offset against tax in their home jurisdictions. Incidentally, South Africa uses the word “sportsperson” without shame : that idea seems to have been too much for the Parliamentary draughtsperson here.
Links:
[1] http://www.acscricket.com