Tax Treatment of Income from Sporting Testimonials
17 August 2015
HMRC’s guidance (EIM 64120) on the taxation of income derived from a sports testimonial takes the approach that unless there is a contractual or implicit entitlement to a testimonial, the proceeds are not likely to be taxable payments of general earnings of the individual. It has been interpreted by those arranging testimonial and other similar events as meaning the proceeds will not usually be taxed where the events have been arranged by an independent committee.
HMRC’s view is that testimonial and similar proceeds are primarily derived from the sportsperson’s employment, and the sums received should normally be taxable as general earnings. The intention to rewrite the guidance to clarify this view was set out in a technical note published in October 2014.
HMRC considers that its tax treatment of income from sporting testimonials and benefit matches given to sportspeople has departed from the strict statutory position. Following representations from a number of interested parties, the government has published a consultation which puts forward a number of options to put the tax and National Insurance Contributions (NICs) treatment of such income on a firm legislative basis.
The changes proposed will affect individual sportspersons who may be awarded a sporting testimonial or benefit after 6 April 2016. The government is seeking views from all interested parties on how any exemption should operate and would particularly like to hear from sporting bodies and advisers and practitioners who may represent those bodies and/or individual sportspersons.
The consultation ends on 2 September 2015.