As the UK prepares for a busy summer of sport, athletes from around the world will arrive to compete at events including Wimbledon, Silverstone and The Open. Behind the scenes, however, international athletes and their advisors face an increasingly complex web of UK tax rules, reporting obligations and compliance requirements.
With HMRC placing growing scrutiny on cross-border income and image rights arrangements, even short periods spent competing in the UK can create unexpected tax exposures.
With any individual in the UK, it is important to assess whether they are considered UK resident, or non-UK resident, for tax purposes. Many athletes here for one tournament, or a few matches, would likely be non-UK residents, however, this needs to be formally assessed by reviewing the UK Statutory Residence Test (SRT).
Many international athletes assume that being non-UK resident limits their UK tax exposure. In practice, however, significant UK reporting and compliance obligations can still arise from competing or performing here.
Specific UK earnings
Income connected to ‘relevant activity’ carried out in the UK will generally fall within the scope of UK tax. This can include appearance fees, prize winnings and certain sponsorship-related payments linked to UK events.
To ensure compliance and to remove the administration burden for some athletes with lower prize money, or fee income, the organisations making the payment to athletes must withhold basis rate tax (20%) and pay this directly to HMRC. This does not specifically remove the burden of UK compliance from the athlete, and reporting will likely still be required to ensure the correct tax is paid to HMRC.
The UK position can then become more complex when income is linked to their global endorsements or sponsorships. Some high-profile athletes are fortunate enough to be sponsored by watch manufacturers, and as such a manufacturer may provide a bonus payment when their branded watch is captured whilst holding a trophy or even published in a “Watches of Wimbledon” newspaper article. Other brands may also provide similar bonus for winning events. Where these bonuses are specifically in respect of a UK event, or presence in the UK, these would be taxable in full in the UK.
When the income can be specifically linked to activity whilst present in the UK, HMRC expect to receive their share of the taxes associated with this.
Where an athlete is considered Self-Employed, as well as being liable to UK taxes on their specific UK earnings, they can claim the related business expenses linked to these earnings. As an example, their accommodation whilst in the UK or direct flights to and from the UK may be considered as a business expense to enable them to attend the tournament.
Worldwide income
In addition to income that can be directly attributed to UK activities, there may also be UK tax implications arising from global endorsement contracts.
Athletes are often required to wear branded items during training and tournaments that promote their sponsors. In return, these brands pay substantial sums for the visible endorsements of their products, with a proportion of this income potentially subject to UK taxes whilst here.
This proportion of UK earnings can be calculated based on one of two methods suggested by HMRC: Relevant Performance Days (RPD) or Relevant Performance and Training Days (RPTD).
For the purpose of these methods, a Performance Day is considered a day on which the athlete performs in public, either for a competition, or for training purposes. Whereas a Training Day is any day where the athlete spends three hours or more training for their sport, in a non-public setting. This calculation is then be used to determine the proportion of an athlete’s worldwide income that is considered UK Taxable Income. The RPTD method is therefore as follows:
Where an athlete is in a sport with fewer competitive events, such as Boxing, the RPTD method is likely more effective from a UK tax perspective. Using the RPD method with only a couple of events a year may lead to a significant percentage of worldwide income being liable to UK taxes.
Similarly to the taxable income, the same method can be used to review the worldwide expenses that may be deducted from that income. As an example, an agent’s fees might be based on a percentage of the endorsement income, and the UK proportion of this could similarly be treated as a UK expense against the UK income.
Outside of the UK exposure, athletes should also review the position in their own country of residence for all relevant income. Although there may be UK tax implications, this may not eliminate tax implications elsewhere, and it will be important to review the relevant Double Taxation Agreement (DTA) to ensure the correct tax credits are claimed.
There can be further complexities where Image Rights are held within a company, or a separate vehicle. In such cases, the potential UK tax implications arising from an athlete’s activities in the UK will require careful review.
As HMRC scrutiny of international earnings, sponsorship arrangements and image rights structures continues to increase, proactive planning is becoming increasingly important for internationally mobile athletes and performers. Managing these obligations often requires close coordination between agents, lawyers, investment managers and overseas advisors to ensure reporting is accurate and structures remain fit for purpose.
At HaysMac, we support internationally mobile individuals with joined-up advice that brings clarity to complex cross-border tax matters, helping them manage compliance confidently while remaining focused on performance, commercial opportunities and long-term wealth planning. Speak to a member of the team to find out more.
