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Navigating the UK tax landscape
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Sam Uwins, Partner at MHA Carpenter Box, discusses the issues and opportunities professional athletes should consider when navigating UK tax.
As top athletes focus their time and energy on achieving their sporting goals, it is easy for them to ignore their financial affairs. The type of income you receive and expenses you can claim are unique to the sporting profession, and therefore require specific advice.
The UK has a notoriously complex tax regime and we always recommend that you watch your position very carefully.
Below, we signpost the key areas you should be aware of when navigating the UK tax landscape.
Sources of income
Dealing with various sources of income that a professional athlete might receive can be more complex than overseeing the finances of other high-income individuals. Sports professionals often have a number of sources of income in addition to their normal salary. If proper consideration is not given to their affair, it can result in an unexpected tax bill at the end of the year.
Potential sources of income can include:
• Sponsorship and endorsement fees • Performance bonuses • Appearance and performance fees • Additional activities not related to sport
Each potential source of income is subject to its own particular tax rules and the amount of tax payable can depend on how you structure your business and financial affairs so it’s essential you get advice to avoid paying too much tax.
Expenses
Whether you are earning a salary in the course of an employment or carrying on some other business, you are entitled to deduct certain expenses in computing your taxable income.
And if you have already incurred these costs, you could be entitled to a tax rebate. These expenses can include: • Travel and accommodation for training, matches or medical treatment • Management and agent commissions • Cost and upkeep of professional clothing and kit • Sports coaching
It is essential to keep a proper record of all your income and expenditure, including copies of any invoices and there are a number of easy to use apps that can help you do this.
Image rights
As your profile grows, your image can form an integral part of your branding and identity. As a result, you have a right to determine how your pictures and images are used.
You can earn money by selling or licensing your image rights. However, your accountant or adviser will need to play key role in structuring an image rights company to hold commercial contracts in a way that meets HMRC requirements. This can save a substantial sum of tax if structured correctly.
Residency
If you are a UK resident, you will generally pay UK income tax on your earnings, whether earned in the UK or abroad. If you earn income abroad, foreign tax paid can normally be offset against any UK tax due.
For non-UK residents, it can be a bit trickier. You will normally pay a UK tax, which can differ between team or individual sports. HMRC have a Foreign Entertainers Unit which can offer advice on your UK tax liability.
Once again, you should be able to offset any UK income tax paid against your tax liability at home. However, foreign players coming to the UK need to be careful to ensure they meet their UK tax obligations. U
