< Go Back Sporting Testimonials - HMRC add further detail to new taxation proposals Posted: Apr 17, 2016
The guidance currently published by HM Revenue and Customs (
on the tax treatment of sporting testimonials and benefits for employed
sportspersons does not, in their view, accurately reflect the current state of the law detailed as
below. Some testimonial income which should already have fallen within
the charge to tax may have been excluded incorrectly as a result. HMRC’s current guidance is therefore considered only to be an extra statutory concession.
A consultation on the withdrawal of this and other extra statutory
concessions was held during the summer of 2014. At the March Budget 2015 the government announced that the current tax
treatment of payments from sporting testimonials for employed
sportspersons as set out in Legislation is to be introduced in Finance Bill 2016 to amend
HMRC’s guidance would be preserved while it considered representations, and that no changes would be made before April 2016. ITEPA
to clarify the law in this area and confirm that income arising from a
non-contractual or non-customary sporting testimonial or benefit for an
employed sportsperson is liable to income tax. Legislation will also be
introduced before April 2017 to deal with certain consequential
amendments for income tax and to set out the NICs position.
The changes to
will also include the introduction from 6 April 2017 of a one-off
exemption of £100,000 from Income Tax, and corresponding legislation
will be introduced for NICs.
This will apply to income from a non-contractual or non-customary
testimonial being paid to or on behalf of an employed sportsperson. The
exemption will apply to income arising from relevant events held in a
maximum period of 12 calendar months only, beginning with the date the
first event is held in a ‘testimonial year’, even if that year straddles
more than one tax year.
If the level of the income arising from the testimonial or
testimonial year falls below the value of the exemption, the amount of
the unused exemption will not be available to carry forward to a future
sporting testimonial or benefit match for the sportsperson, or against
any other testimonial events held after the end of that 12 month period. Correspondingly if a payment to a sportsperson exceeds the exemption limit then the Committee will be obliged to operate PAYE and report and return all deductions to HMRC under the RTI arrangements.
Any non-contractual or non-customary testimonial events held on or
after 6 April 2017 from a testimonial that is awarded or arranged for a
sportsperson prior to 25 November 2015 will fall within existing
arrangements. Finance Bill 2016 will also introduce legislation in Corporation Tax
Act 2010 that will enable an independent testimonial committee that is
chargeable to corporation tax to deduct sums paid to, or for the benefit
of, the employed sportsperson, and associated
PAYE and any NICs liability, from the committee’s taxable profits.
Where an employed sportsperson has a contractual right, or a ‘custom’
is established to a sporting testimonial or benefit match, then the
income (after expenses incurred are deducted) is chargeable to tax as
earnings of the sportsperson under section 62 of the Income Tax
(Earnings and Pensions) Act 2003 (
ITEPA) from the related employment. There is also a Class 1 NICs liability on these earnings.
HMRC’s treatment of
sporting testimonials and benefit matches where there is no contractual
right (or no custom established) has previously relied on the 1927 tax case of Reed
v Seymour. This case established the principle that where a testimonial
or benefit is organised to demonstrate affection and regard for the
personal qualities of the sportsperson, the proceeds are not from the
employment and are not earnings.
However, since then there have been significant changes to tax
legislation. In particular, the introduction of the ‘benefits code’ in
1948, and more recently in 2011 the introduction of Part 7A of
(which applies a charge to tax on employment income provided through
third parties). Taken together these changes mean that a wider range of
payments are chargeable to tax and HMRC clearly believe this is enough to tax the proceeds of testimonial and benefit arrangements as if they are employment or employment related earnings.
Further detail regarding the arrangements can be found on our
Sporting Testimonials service page and if you need and further advice on these issues you can also contact us here.