Free article section

You are reading a Free article. Apply for a subscription to access all the valuable information on the website Sports Law & Taxation

UK tax policy towards sports stars

By Dr Karolina Tetłak, LL.M. The United Kingdom recorded a growth of interest in sports events after the success of the European Football Championship UEFA EURO 1996. Indeed, England currently has the broadest portfolio of annual sporting events in relation to the population. A strong bidder for major sports events, the UK has long opposed the demands of sports organizations as regards the implementation of special tax regimes for championships and strongly defended its right to levy tax on foreign athletes. However, the UK's tax laws on athletes have been heavily criticised by sportspersons and sports governing bodies. The UK tax system is perceived by many top international sportsmen to be overly restrictive. The general rules of British tax law provide for the taxation of foreign athletes on their income arising in connection with the performance in the UK, which includes appearance fees, awards, and part of endorsement payments, considered to be earned during their stay in the UK. Particular controversies are raised by the allocation of income from sponsorship and other commercial income to the time spent in the UK, especially since the local tax authorities claim the right to tax such part of the endorsement payments received by athletes that can be assigned to their performance in the UK, even if the payments are made abroad by a non-resident to a foreign athlete or intermediary company. Applying a broad interpretation of the source (territoriality) principle, the United Kingdom imposes a tax on earnings from duties performed in the UK by non-resident employees, as well as profits from business activities of non-residents, in so far as these activities are conducted in the UK. Importantly, the tax covers all income, and the criterion for its application is exclusively the performace of sporting activities in the territory of the UK. As a result, the taxation of foreign athletes covers all income, regardless of where it was earned (worldwide income), as long as it can be attributed to the activities undertaken in the UK. Such an approach, allowing for the collection of a domestic tax on income of foreign non-residents, results in the extraterritorial taxation that many sports stars appearing in the UK object to. In 2010, the famous Jamaican sprinter and Olympic champion Usain Bolt refused to participate in the Diamond League competition because of the UK tax framework, under which tax would be payable both on his winnings and on part of his global earnings from sponsorship. Taking into account the tax breaks for selected sporting events, the reaction of the Jamaican sports celebrity is not surprising. It is natural that in such a situation, there occurs the feeling of opposition against the unequal treatment and the belief that it is not worth it to take part in competitions burdened with tax at source, especially since participation in other championships in the same country may bring a tax-free prize. The decision of the Jamaican runner sparked a debate in the media and has launched an open and heated discussion about the tax treatment of sporting events. It also encouraged other athletes to refuse to participate in competitions not covered by a tax immunity. For example, in September 2010, American golfers announced that they would not participate in the 2010 Ryder Cup in Wales because of high withholding tax. When it became clear that the United Kingdom began to be overlooked in the race for hosting major sporting events, the country departed from its general rules on several occasions and offered tax-free treatment to athletes. Other host countries have satisfied the tax immunity requests of sports governing bodies, and the UK had to comply with the emerging practice to remain a competitive bidder. For example, a tax break for players was introduced by Germany for the 2012 Champions League final in Munich, where the tax rules are similar to the UK. As a result of such tax competition, although the general UK approach to the taxation of athletes is consistent with article 17 of the OECD Model Tax Convention, the demands of sports organizations regarding the implementation of special tax regimes for championships have resulted in inconsistent behavior by the British tax authorities. The Wembley Stadium was chosen to host the 2011 and 2013 Champions League finals after the UK traded its tax on foreign athletes for hosting the Champions League. Since tax was the reason given why London missed its chance to host the prestigious game in 2010, the government announced legislation to exempt continental footballers' prize money from UK taxation. Similar tax measures were enacted for the 2012 London Olympic Games to exempt the International Olympic Committee and participating non-resident athletes and officials involved in the Games from any tax liabilities. Worried about the prestige of the 2013 Diamond League event which has been damaged by the absence of runners such as Usain Bolt, the UK Finance Minister announced that a tax exemption would be provided for the Diamond League athletics. In 2015, Usain Bolt returned to London Olympic Stadium for Anniversary Games but only after the Government confirmed tax breaks for athletes. Although foreign players are normally liable to pay tax when they appear in events in Britain, the United Kingdom also gave up its withholding tax with regard to the Commonwealth Games held in Glasgow in 2014. The exemptions granted by the United Kingdom for major international sporting events are specifically targeted and apply only to particular events referred to in the tax measures. The problem is that inconsistent tax policy concerning athletes’ participation in events held across the country and incidentally issued regulations raise questions in light of the principles of equality and fair taxation. Such an approach can also result in pressure from other athletes and organizations requesting similar tax preferences. While the introduction of a tax break is meant to increase the country’s attractiveness as a candidate to organize a specific event, it seems inappropriate that the exemptions only cover football players taking part in one sporting event and omit the participants in other tournaments such as Wimbledon or the British Open Golf Championship. Offering one-off tax exemptions is a move that encourages the best athletes to compete in the UK but it makes top athletes call for an exemption for their UK events. Given that the overall cost of the athletic tax breaks to the Treasury is estimated at £1.5 million a year, the government could extend the relief to the wider international sport arena. The UK definitely needs a well thought-over, transparent and consistent tax policy towards sporting events to enable it to successfully bid for major championships. Such policy should not be made on a case-by-case basis whenever a famous athlete makes public concerns about not competing in the UK because they view the UK tax regime as restrictive. Dr Karolina Tetłak, LL.M Assistant Professor Tax Law, Warsaw University, Poland.

Issues of the Journal

Interesting article?

Take your own subscription to get easy online access to all valuable articles of Sports Law & Taxation
The Journal

Sports Law & Taxation features: articles; comparative surveys; commentaries on topical sports legal and tax issues and documentation.

The unique feature of Sports Law & Taxation is that this Journal combines  up-to-date valuable and must-have information on the legal and tax aspects of sport and their interrelationships.

Global Sports Law and Taxation Reports feature: articles; comparative surveys; commentaries on topical sports legal and tax issues and documentation.

The unique feature of Global Sports Law and Taxation Reports is that this Journal combines for the first time up to-date valuable and must-have information on the legal and tax aspects of sport and their interrelationships.

The Editors

The editors of  the Journal Sports Law & Taxation are Professor Ian Blackshaw and Dr Rijkele Betten, with specialist contributions from the world's leading practitioners and academics in the sports law and taxation fields.

The Editors

Managing editor
Dr. Rijkele Betten

Consulting editor
Prof. Dr. Ian S. Blackshaw

Editorial board

Prof. Guglielmo Maisto
Maisto e Associati, Milano

Mr. Kevin Offer
Hardwick & Morris LLP, London


In partnership with

Screenshot 1



Nolot BV
St. Jorisstraat 11
5211 HA  's-Hertogenosch
This email address is being protected from spambots. You need JavaScript enabled to view it.