Is the UK’s tough tax regime compromising the appeal of sporting events in the UK?
Wednesday, January 12, 2011 | Posted by: Francesca Lagerberg
Categories:
Personal
| Tags: tax,
HMRC,
2012 Olympics,
sports,
sports stars,
Andre Agassi,
Usain Bolt,
sports personalities,
2011 Champions League,
high rate earners 50%
HM Revenue & Customs (HMRC) has one of the most aggressive approaches to the taxation of overseas sports stars in the world. It can even lead to situations where competitors face suffering a UK tax liability in excess of what they could earn in appearance fees or prize money from the tournament. Therefore more and more sports stars are avoiding the UK for tax purposes, denying British fans from seeing their sporting heroes in person.
Sports stars generally have several streams of income. Not only do they receive fees and prize money from tournaments, but the top names may often have lucrative income rights from endorsements, advertising and image rights. These income rights are often acquired in deals conducted overseas and paid to an overseas company owned by the individual.
Sports stars on HMRC’s radar
These overseas income streams have been on HMRC’s radar for some time and in 2006, it won a high profile case against Andre Agassi, securing not only a slice of the income he earned whilst competing in the UK, but also a proportion of this lucrative overseas income.
Furthermore HMRC takes an aggressive approach to the apportionment of these payments which are deemed to be taxable in the UK. Taking the Agassi case as an example, rather than simply looking at the number of days spent competing in the UK (eg two weeks of the year spent at Wimbledon), HMRC will instead compare the time spent competing in the UK relative to the sporting calendar, (eg Wimbledon representing 1/5th of the grand slam events occurring in the year) greatly increasing the UK’s slice.
High UK tax rates
The problem is further compounded by the high rates of income tax that UK income can be subject to. The recently introduced 50% rate for high earners is reportedly the 4th highest tax rate in Europe.
Sports stars are choosing to avoid UK competitions for tax reasons. For example, Usain Bolt turned down the opportunity to compete at a high profile event at Crystal Palace in 2010. Indeed, it is expected that he will not compete in the UK until the 2012 Olympic Games.
Special tax rates for sports stars?
Bolt and his fellow Olympians will descend on the UK in July 2012 to compete in one of the greatest events in the sporting calendar. How many of the leading names would take part were it not for the special concession in place to ensure they will not suffer any UK tax as a result? A similar concession has also been granted to any overseas teams competing in the 2011 Champions League final at Wembley, after the bid to host the 2010 final failed because of tax reasons.
You may feel that these sports stars are only paying their fair share of UK tax. However, if you consider the additional tax take generated by these high profile sports competitions (such as the VAT on ticket sales for example), the income tax is a comparatively much smaller number. It really is a wonder why the Government is seemingly intent on making the big named overseas sports stars stay at home.
It will be interesting to see what the Government will do to attract sports stars back to the UK in the future. Will it soften its approach to how income is apportioned, or perhaps increase the number of tax exempt sporting events? Either way, steps will need to be taken in order to avoid depriving UK sports fans the chance of seeing their heroes compete.
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