Sports people and endorsement income

Published by Julie Burton on 14 July 2021

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HMRC has the right to tax all income arising in the UK whether the recipient is resident here or not. The problem for non-resident sportspeople is that HMRC defines their income to include not only UK winnings but also a proportion of their worldwide income including income from endorsements (sponsorship) and image rights which can be considered to have been earned while they were in the UK.

For example, a golfer will receive endorsement income for using a particular brand of golf club. The contract will specify that he uses that club for all the tournaments in which he appears. HMRC argue as a result that when he uses that club playing in the UK he is earning endorsement income in the UK. As a result, a proportion of endorsement income will be taxable in the UK. This could be based on the days spent playing in the UK including practice days over the total number of days playing golf and training in the relevant year.

So the golfers playing in a Ryder Cup in the UK will do so for the honour of it, receiving no fee, but they will still have a tax liability because of the endorsement income HMRC will say they have earned while playing in the UK. Similarly, a golfer may miss the cut at the Open and still have a UK tax liability if they have lucrative endorsement contracts.

Many sportsmen consider this unfair. The problem for the UK is that as a result, it is beginning to lose out on hosting sporting events.  Wembley could not host the Champions League final until the event was given an exemption from this tax rule and the London Olympics also had a special exemption in place.

Good luck to all the golfers taking part in this year’s Open!

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