The Malta Insight Series. Advising Sports & Entertainment Stars Issue
The Malta Insight Series
Foreword by Nicky Gouder Their career is typically extremely short. When compared with other industries and occupations, the career of a sportsperson or entertainer, and the income generating window is extremely limited, ending in their mid 30s when, suddenly, revenues could drop considerably, sometimes disappear completely.
The sports and entertainment industries have always had a particular appeal, for a variety of reasons – be it the fame, the money, coverage – everyone wants to be in this space. This is also one of the reasons why I enjoy advising clients in these industries!
Bringing in competent and trusted advisors on board, at an early age, is crucial to ensure wealth preservation both during their career and during The truth is that a lot of traps can come with fame, retirement. Trustees can play a crucial role in this – money and prestige and I have seen sportspersons they can manage the individual’s wealth to ensure or entertainers lose everything they had built over that it is preserved throughout, and beyond, their a number of years, in just a couple of months. lifetime and not just during the few years of their sporting career. Planning is key, planning early is crucial. Whether we are looking at tax planning or wealth manTax planning is also another important aspect agement, it is important for individuals in these to consider when deciding on structures, income industries to plan early, where possible. Doing so streams and other related matters. This is particulater will simply result in more complex and exlarly important for ‘mobile’ individuals who have pensive solutions. income arising in different jurisdictions, with the different tax treatment and withholding tax conAccording to Sports Illustrated, 78% of NFL playsiderations of a number of different countries. ers who are retired for only two years file for bankManagement and ‘image rights’ companies could ruptcy, and after five years of retirement, 60% of be considered for this purpose – such companies NBA players suffer the same fate. These figures are need to ensure that they have the proper advisors shocking and reiterate the need for proper finanon board and manage the cial planning amongst sportspersons. sportsperson’s or enterThis digital pubtainer’s career, holislication aims to shed The concept of wealth preservation is important tically. some light on the above for any client operating in any industry, howevissues by presenting 2 sepaer, more consideration needs to be given to the rate case studies and what presentation of wealth for sportspersons and ensolutions Malta can offer in this respect. tertainers, for several different reasons.
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The Malta Insight Series
Nicky Gouder | Partner, Seed Consultancy +356 7909 2692 • nicky@seedconsultancy.com
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The Malta Insight Series
Case Study 1 - Gloria
In this new series of case studies with Seed Consultancy in Malta, our panel discuss the case of Gloria Simons: • • • • • • •
World-famous singer, 50 years old Canadian passport holder UK resident for previous 10 years Performing and royalty annual income of £500k Recently divorced with 3 adult UK resident children £10m of personal offshore investments £5m London home held outright
How is Gloria’s performance income taxed?
of the UK IHT net. The assets and income could accrue until distributions are made according to the trust deed provisions.
Performance income is governed under local law. Her performance income will therefore be subject to tax in the country she performs.
To spend more time in Europe and less in the UK, what are the considerations for obtaining a Maltese passport?
Could royalty income be more efficiently managed if held through a Maltese structure while Gloria is UK resident?
Gloria could be naturalised as a Maltese citizen through an investment programme which could allow her to spend more time in Europe. Becoming tax resident in Malta is not a direct result of obtaining Maltese citizenship
Although removing royalty income from the UK might give rise to an initial CGT liability, overall, this might be beneficial due to very low corporate tax rates in Malta, typically 5% or 10%.
What would Gloria’s tax position be if resident in Malta?
What kind of succession planning might Gloria consider for her heirs?
Malta taxes on a remittance basis, therefore any income arising outside Malta would not be taxable unless received in Malta. She would have a minimum annual tax due of either €5,000 or €15,000 depending on her route to residence.
She could set up an ‘excluded property trust’, while she is non-domiciled resident in the UK, which would lock any non-UK situs property out
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The Malta Insight Series
What should she consider in How should Gloria manage her terms of managing her existing investments in respect of curwealth offshore? rencies? Uncertainty of earnings for an entertainer means liquidity of assets and access to high-income-producing investments are key considerations.
She needs a portfolio with stability in sterling while in the UK, but in the longer term, she should focus on the type of investments, regardless of location, and the potential opportunities for her heirs.
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The Malta Insight Series
Case Study 2 - Jack
In the second case study, the panel discuss the case of golfer, Jack Edwards: • • • • •
35 years old, UK passport holder where his wife and 2 children live Several months a year spent abroad at tournaments and training Competes in Europe and the Middle East A high-profile player with promotional contracts with leading brands Longer term, likely to sign lucrative contracts with media companies
How does Jack manage a short period of high earnings with long retirement?
What approach to long-term risk portfolio management should be taken?
A cash flow forecasting system can be used to ensure wealth is maximised tax efficiently while he is earning. Factors such as the family’s current and future priorities, income, outgoings, potential risks during his career such as injury and fluctuating popularity, are considered.
Different types of investments have different risk. Longer-term objectives can afford more risk, whereas shorter term, the risk should be lower to ensure there is money when needed.
What are the legal considerations for optimising his earning potential over his career?
How should Jack think about tax efficient saving while UK resident?
A proactive approach should be taken in assessing risk. Has he got the correct contractual protection? Is his level of liability reasonable? Are his contracts structured correctly? How are his collective rights utilised and licenced? He could consider a mid-nuptial agreement.
Pensions, ISAs, offshore bonds, and specialist investments such as EIS and VCTs should all be considered.
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The Malta Insight Series
How could Jack use an image rights structure?
How can he protect himself from litigation risks?
Jack could transfer or licence his image rights to a management company, ideally early on in his career when asset value is lower. Such structure could also be set up in Malta. He could undertake a programme to become resident there. Tax benefits would enable him to pay tax on a remittance basis.
If sued for breach of contract, there is a potential effect on his other contracts. All contract clauses should be reasonable and reviewed regularly. He will have some protection if he hasn’t entered these contracts personally.
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