HMRC have released new tax exemption rules for non-UK resident competitors in the 2012 London Olympics . . .

Although tax regulations applying to non-UK competitors in the Olympics has been suspended, superstars such as Usain Bolt, Michael Phelps and Roger Federer may still be liable to pay tax on their income earned in the UK. Under normal regulation any non-UK resident is liable to pay UK income tax on any income they earn for their actual performance and anything related to that performance. This includes sponsorship or endorsements, TV and personal appearances. Athletes’ tax bills are calculated using a ratio of UK performance days to worldwide performance days. For example, if an athlete competes in ten events globally and one of these is held in Britain, then they would be charged one tenth of their worldwide endorsement earnings at a top rate of 50%.

This regulation has in the past caused big stars like Bolt to pull out of major events, such as the Aviva London Grand Prix, as he did not want to give the British taxman a chunk of his earnings. When London bid for the Olympics the government agreed that all non-UK competitors would be exempt from income tax. But new guidelines issued by the HMRC means that athletes will now be taxed on any activity not directly related to the 2012 games. The Finance Act 2006 exempts foreign Games participants from paying British income tax on their performance in, or promotional activity for the Olympics between 30th March 2012 and the 8th of November 2012.

The following examples will be exempt from UK income tax:

    • If a competitor is paid to appear in an advert or television appearance to promote the 2012 London Olympics.
    • Paid trackside interviews will be exempt, providing that the interviewer does not include references to the athletes’ kit recommendations.
    • If a competitor is eliminated and joins the media as a commentator, their income for commentating on the games will also be exempt.

However, the HMRC have also said that any payments received during this time that are not connected to the Games will not be exempt. The following examples will not be covered by the rule:

    • Financial rewards earned for competing in the Olympic Games when entering into a new contract, or amending an old contract on or after the 25th of July 2012.
    • If a competitor is invited on a radio or television show and they do not discuss the 2012 games – e.g. appearing as a guest host on a quiz show.
    • If an athlete is promoting a commercial product or is the face of a brand as an Olympic winner. Many sports people endorse products so this will not be treated as a Games related endorsement.

Basically, if an endorsement contract does not officially advertise the Olympics, then the star in question will have to pay tax.

The implementation of these rules is thought by many to be in a bid to discourage big name brands such as Puma, Nike and Speedo from using big name athletes – Usain Bolt, Roger Federer and Michael Phelps – to capitalise on the ‘exemption window’ and use Britain as a base to film new advertising campaigns.

Kevin Kinsella Jnr, of Kinsellatax, said:

“The amount of income tax is about £8 million per year, which is completely outweighed by the benefits brought in by overseas sportsmen and women. “I also wonder when a sportsperson will bring an action under the Human Rights and Restraint of Trade provisions. Some-one, sooner or later will bring some action.”

All UK tax exemptions will depend on each athlete’s individual contract, so there is speculation as to whether the HM Revenue and Customs (HMRC) will take the time to investigate the endorsement deals of over 12 thousand non-UK competitors.

Are HMRC looking into your tax affairs? Our tax experts can be reached 24 hours a day and are here to battle with HMRC on your behalf. Speak to our specialists SOONER RATHER THAN LATER on 0800 471 4546. KinsellaTax staff consists of ex-HM Inspector of Taxes and ex-HM Custom and Excise Officers, fully experienced in HMRC Investigations.

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