Sport professionals are different to many other people when it comes to tax. They earn high wages and have a number of different income streams depending on their status in their sport. The amount of tax they pay is also dependent on the sport they play and whether they are an amateur or professional.
Where the money comes from
It is not uncommon for well-known sports professionals to have a number of different agreements in place that earns them money. They can receive payments in the form of grants and gifts, sponsorship and endorsement fees, performance bonuses, appearance fees and performance fees as well as payments for activities that are not directly linked to their sport. This could cover things such as commercial contracts and advertising agreements as well as writing newspaper article – the list is quite extensive.
UK resident sports professionals will pay UK income tax on any earnings regardless of whether they receive the payment in the UK or abroad. Where earnings are made abroad, it is possible that foreign tax could be offset against the UK tax. For those sports professionals who are non-UK residents, they will be expected to pay tax on those earnings that are linked to UK activities.
Income from endorsements
The tax that sports professionals pay is very confusing and complex and once again it is linked to the sport that they are involved in. For those sports professionals who are foreign, yet live and play in the UK, they will be susceptible to UK tax laws but it becomes a completely different situation when you have visiting sports professionals who take part in a competition and then leave the UK. This is where they have to hand over a certain percentage of their global endorsement income, the amount will be in proportion with the time they spend in the UK.
This is one thing that has been turning foreign sports people away from the UK for some time as the tax that they have to pay can in some cases, be greater than the prize money and appearance fees they receive for taking part in a UK event. However, the Government have recently made a change to the rules in an attempt to encourage top foreign sports professionals to come to the UK.
Image rights are another form of income for sports professionals and this is where they have a proprietary right in their personality and a right to stop unauthorized use of their name or image. Therefore, they can profit from the sale of their image right or they will put an agreement in place for so that they can be used by a club or organisation for a fee. Often, these rights are passed to image companies that are offshore and this causes problems for HMRC as a company will pay corporation tax at a lower rate and they will not have to pay National Insurance and this means that the Exchequer loses out on a considerable amount of money.
It is clear to see that the tax that sports professionals depends on a number of different aspects and scenarios and that in turn, makes it very tricky to clearly define exactly what tax they pay.
If you have are a sports professional worried about your tax return please contact The Accountancy Solutions on 01216297768 or 02070784001 for further advice. We are accountants specialist in calculating and finalizing tax returns for sports professionals.