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United Kingdom: Olympic sportspersons not entirely exempt from UK tax?

Just 400 days away from the start of the 2012 Olympics, and the Treasury is braced for a new tax backlash from athletes next Summer. The UK?s punitive taxation regime for non-resident sportspeople ? which meant Wembley could not host the 2010 Champions League final ? could create problems again. Olympians expecting to be exempt from UK income tax under specific legislation introduced for the Games could in fact be taxed in relation to community and promotional work on behalf of sponsors whilst in the country according to the HMRC?s Foreign Entertainers Unit (FEU), which enforces the legislation. Under current rules, in line with most countries, sports stars taking part in matches or tournaments in the UK are liable for income tax on prize money and appearance fees. However, the UK differs from all other countries (with the exception of the US) in that tax authorities also seek to tax a proportion of the athletes? global endorsement income. It is these rules that can lead to sportspeople paying more in UK income tax than they actually earn in the UK, and the reason why some ? such as Usain Bolt ? have refused to come back to compete in the UK until the rules are changed. When bidding for the 2012 Games, one of the tax guarantees that the London 2012 bid committee had to provide was that the athletes would not be subject to tax on their ?Games-related income?. The legislation released in the 2006 Finance Act simply stated that ?Powers will be introduced? to enact this policy, and the relevant statutory instrument was introduced last summer, with little fanfare. The exemption for non-resident sportspeople applies for the period from 30 March to 8 November 2012. Pete Hackleton, Senior Tax Manager in the Sports and Entertainment Group at top 20 accountants Saffery Champness stated: ?Since the release of guidance last year, it has been assumed that any UK appearances in that period ? with the exemption of annual UK events such as Wimbledon ? will not be subject to UK income tax. However the FEU have recently confirmed that any UK appearances on behalf of sponsors not directly linked to the Olympic Games are not covered by the exemption, and they will seek to collect UK tax". ?Athletes assumed that they would not be taxed in the UK during the Olympics and would be unpleasantly surprised by such tax demands. It would be a further embarrassment on the international sporting stage for the UK Treasury. In 2008, UEFA refused to award the 2010 Champions League final to Wembley with Michel Platini confirming ?Yes, the reason was the taxes?. A decision on 2011 was delayed until a specific guarantee on taxes was announced, with Wembley only confirmed as the venue once the tax guarantee was in place.? Julian Hedley, Head of the Sports and Entertainment Group at Saffery Champness commented: ?This is yet further evidence of the Treasury?s lack of foresight with regards to the benefits that major sporting events bring to the UK. The annual income tax collected on endorsement income from non-resident sportspeople is around ?7m, a tiny amount compared to the contribution sport makes to the UK Exchequer. These overly complex and punitive rules already mean major stars prefer to compete in other events rather than the UK, and there is a real danger that major events will start to leave the UK. ?Following last week?s announcement that the 2013 Champions League Final may come back to Wembley, it is assumed that UEFA have requested another exemption for players in order to host the final in the UK. Many countries have legislation in place to provide tax guarantees in order to host major sports events, as the wider benefits for the country are clear. However in the UK, only two events have received special tax exemptions to date (the 2011 Champions League Final and 2012 Olympics) and it is clear that those in other sports are angered by the lack of consistency.? Hackleton continued: ?We are clear that tax exemptions should be provided for major sports events to be hosted in the UK; the events bring a substantial benefit to the UK economy over and above any tax lost, and the chance to see sporting icons in the flesh is an inspiration to the next generation of sporting stars in the UK. But exemptions should be much more widely applied, as otherwise there is a real danger that internationally mobile sporting events could re-locate in future.?
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Dr. Rijkele Betten

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Prof. Dr. Ian S. Blackshaw

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Prof. Guglielmo Maisto
Maisto e Associati, Milano

Dr. Dick Molenaar
All Arts Tax Advisors, Rotterdam

 

Mr. Kevin Offer
Hardwick & Morris LLP, London

Mr. Mario Tenore
Maisto e Associati, Milano

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