HM Insights

Sports testimonial payments and tax – an important update

The tax treatment of payments made to sportspersons, arising by reason of their sporting activities, has been a subject of much debate and attention over recent times.

A number of high-profile cases and investigations, in both the United Kingdom and abroad, have highlighted the greater level of attention now being paid to this area by authorities. This has been supplemented by movements on a more general level to enforce substance-based taxation in international arrangements, and on a local level to prevent the facilitation of abusive avoidance and evasion.

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Taxing the tribute

The UK taxation authority, HMRC, has revised its approach to sportsperson taxation significantly over recent years. Further attention is now being paid to testimonials – events organised to honour the contribution of a sportsperson approaching the end of their career, the proceeds of which go directly to the player. Testimonials are particularly prevalent in football, with star players traditionally benefitting from the money raised from a non-competitive match and other events held to pay tribute to them.

April 2019 saw the first (and second) readings in parliament of a bill brought in to deal with the treatment of sporting testimonial income. At the same time, HMRC published guidance relating to the proposed bill. Further details are available here.

What has changed?

In essence the bill is intended to address the national insurance contribution and income tax treatment of sporting testimonial payments, imposing a national insurance contribution obligation upon the controller of the testimonial, and includes any payment made to clear any income tax liability arising from the testimonial payment.

It is expected that the bill will have effect from April 2020. Those advising sportspersons and dealing with their commercial rights, and those organising testimonials, should be aware of the effect of this proposed legislation.

Get in touch

To discuss any aspect of organising testimonials, or other matters relating to sports brand rights, contact Jamie Watt.