Taxes on playing in the UK – advice for international sports stars

The football World Cup is over, and the wait for the next international tournament has begun. International tournaments take years of planning, and Reuters recently reported on difficulties with the UK and Ireland’s bid for the Euro Championships in 2028. UEFA, European Football’s governing body, has apparently raised concerns about the bid - one of which is the taxation of the players competing in the competition.

This is unsurprising as, whenever the UK holds international sporting events, tax can be a potential problem because sport stars are taxed when they compete in UK tournaments. In 2011, it was reported Rafael Nadal refused to compete at Queens, the traditional precursor to Wimbledon, due to UK tax laws. In 2010, Wembley reportedly lost out on hosting the Champions League Final due to tax reasons.
 

What is taxable in the UK?

It is not just the player’s winnings or wages for UK performances that are taxable: HMRC will want to tax part of their income relating to sponsorship deals and endorsement income. So perhaps it is not surprising that sports stars may be hesitant to compete in the UK, with the potential to be taxed on a proportion of their earnings from worldwide sporting activities based on their time spent in the UK. While this is a known issue for traditional sports, players in emerging sports such as E-Sports should be aware that they will also fall within the rules for UK tournaments.
 

Specific exemptions

In some scenarios, the UK government will implement a policy to ensure that non-residents are not taxed when they come to compete here: usually where the overall benefit to the UK of holding the event or tournament outweighs the loss of tax revenue. For example, in 2021 specific legislation was introduced so that non-resident football players playing in the 2021 UEFA Super Cup match (held in Belfast) and team officials were exempt from UK tax on income related to their time in the UK for the game. A similar income tax exemption was introduced as a condition of the UK’s successful bid to host the UEFA Champions League Final 2017 in Cardiff and matches at the UEFA Euro 2020 Final.
 

Where no exemption is in place

Where no specific exemption is in place, reporting UK income can be a minefield for overseas sports stars, their representatives and organisations. For any team sport, this can also potentially generate issues for the club or association, as the players are mostly seen as employees, bringing the employer into the equation.

In the first instance, any money paid to the sports stars in respect of performing in the UK should have had tax deducted by whoever is paying it. It does not matter whether this is paid directly or via a third party, such as a football club. Sponsors should also deduct tax from any sponsorship money relating to sports stars’ performance in the UK. An example that HMRC’s Foreign Entertainers Unit provides is endorsement fees paid to a tennis player to use particular equipment in a UK tournament.

Sports stars need to work out how much of their worldwide sponsorship relates to their performance in the UK. For a specific endorsement contract, as above, this is straightforward, but many sponsorship deals are on a worldwide annual basis. HMRC recommends that they can do this by calculating the number of days they were in the UK either performing or training and then working out how much of their worldwide sponsorship and endorsements relate to that period. This can be a subjective and complex process, depending on the precise terms of the contract.

HMRC’s manuals offer guidance as to how to apportion income, but the suggestion is not statutory. There is, therefore, an opportunity for sports stars to put forward a method that is more appropriate to their particular circumstances, although any alternative method will need to be approved by HMRC. HMRC does allow a deduction for expenses incurred wholly and exclusively in connection with the UK performance (for example, accommodation for self-employed sports stars).
 

UK tax returns for sports stars

Once the net income is calculated, then the tax due on it needs to be computed, and if it is more than the amount withheld at source, the player will need to submit a UK Self-Assessment Tax Return to HMRC and pay the additional tax due.

Under UK tax law, if an individual fails to inform HMRC that they are required to submit a tax return, this “Failure to Notify” can lead to a tax penalty. HMRC can charge substantial penalties (up to 100% of the tax due) as well as imposing other sanctions - even publishing the name of the individual on the “Deliberate Defaulters” list in more serious cases. See Failure to report your taxes can lead to more than a red card.
 

Expert help

One point is clear - professional advice should always be sought. If mistakes have happened in the past, it is always advisable to come forward voluntarily and disclose the failure (or omission from a tax return) to HMRC, as this can help mitigate penalties and the potential sanctions. Where a player has spotted that they do need to submit a tax return, getting help to complete it accurately the first time is a sound investment – making mistakes can lead to protracted problems with HMRC.

BDO is a leading tax adviser in sports, working with businesses, professional players and regulatory bodies in the sector to manage all the tax risks and compliance obligations that they face and resolving disputes that have arisen with HMRC. BDO International operates in 164 countries, and can assist with international taxation matters to provide holistic support.