Should HMRC review income tax on overseas sports stars?

Accountants may be interested to learn that the tax on foreign sports and entertainment stars is yielding benefits for HMRC.

A freedom of information request revealed that the tax yielded £68 million for HMRC in 2009-10. In 2008-09, the tax on appearance fees, endorsement income and revenue from foreign stars performing in this country totalled £56 million.

However, a lot of top overseas stars have spoken out against the tax. Usain Bolt, the Jamaican sprinter, said he avoided coming to the UK because of the tax system, and Rafael Nadal will not play at the Queen’s tournament that precedes Wimbledon because he said he would be out of pocket.

HMRC works out the amount of tax overseas stars pay based on the number of UK events they participate in as a proportion of total worldwide events. So, if someone takes part in four events during the year and two of them are in the UK, HMRC would levy tax on 50% of their worldwide endorsements.

Tax manager Sean Bannister from Lass Salt Garvin said this income tax on overseas sports stars is causing top athletes to actively avoid satellite events that take place immediately before and after major tournaments. He went on to point out that as well as making the UK uncompetitive as a hosting nation, the tax means that fans are also suffering.

However, athletes taking part in next year’s Olympics will receive a partial exemption. Bannister believes that this adds to the unfairness of the system and HMRC should review the tax in order to protect such events as Wimbledon and the British Open.

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