International Entertainers and Sportspeople Must Plan for UK Tax

In most situations, non-UK resident individuals temporarily visiting the UK to carry out work duties via employment or self-employment don’t incur a UK tax charge. If a UK tax liability does arise, the individual will normally offset all or some of that charge by a double tax treaty. This treatment doesn’t extend to non-UK tax resident sportspeople and entertainers, who are taxable in the UK on income earned in connection with their performance in the UK.

Several countries have adopted rules that sit alongside their own domestic tax legislation for visiting sportspeople and entertainers, with the UK being one of the first.

UK Tax Rules

Any individual or organization that pays a sportsperson or entertainer—including payments to image rights or personal service companies—to appear in the UK is required to withhold basic rate income tax if the gross annual payment exceeds the personal allowance of £12,570 ($16,000) for 2023–24.

If the individual’s net profit exceeds the personal allowance and basic rate band in a tax year (broadly more than £50,000), it’s likely that additional UK tax will be due. The individual is required to register for self-assessment and file a UK tax return and will be exposed to UK income tax at the usual rates—20% basic rate, 40% higher rate, and the additional 45% on income over £125,140 for 2023–24, after deducting applicable business expenses.

The level of allowable expenses, such as travel, accommodation, and coaching, could produce a refund of some or all the 20% withholding tax.

This cashflow disadvantage can be mitigated or eliminated altogether with an application to the UK tax authority, HM Revenue & Customs’ foreign entertainers’ unit for tax to be applied to the net profit anticipated, rather than the gross amount of the appearance fee.

In most jurisdictions, tax is applied to income directly related to the appearance fee or prize money received. However, the UK is one of a small number of countries where additional tax is applied to a portion of the individual’s global endorsement income connected to their performances.

How is UK Income Calculated?

All prize money earned from UK-based performances is subject to UK taxation, as are appearance fees and bonuses paid by sponsors which specifically relate to UK tournaments.

HMRC offers one of two methods to calculate the UK element of endorsement income—the relevant performance days—RPD—or the relevant performance and training days—RPTD—method.

A performance day is defined as a period spent performing in public for any amount of time in a competition, or for training purposes. A training day is three or more hours of physical activity spent training toward the chosen sport and which the public aren’t invited to watch (in the gym, road running, or practice, for example). The apportionment calculation will use one of these two methods to work out the number of UK days as follows:

Endorsement income x UK days / worldwide days = UK taxable income

For example, if a sportsperson spends 100 days of the year performing their sport in competition, of which 10 are spent performing in the UK, using the RPD method 10% of their worldwide endorsement income is subject to UK tax. If the total number of performance and training days was 300 and only five additional days were spent training in the UK, then the RPTD fraction of 15/300 would mean that 5% of the sportsperson’s worldwide endorsement income would be subject to UK tax—see example in the table below.

The sportsperson is free to choose which method to use for each self-assessment year. Given that a nonresident individual is likely to spend most of their time training outside of the UK, the RPTD method is usually the preferred option.

A detailed diary accurately tracking the individual’s movements from one jurisdiction to another should be kept as HMRC regularly asks to see evidence of the worldwide training days.

Criticism of HMRC’s Approach

HMRC’s decision to tax endorsement income has received criticism over the years, as it often deters athletes from competing in the UK; Usain Bolt didn’t take up regular invitations to complete in the UK, and both Roger Federer and Rafael Nadal habitually played warm-up tournaments for the Wimbledon championship outside the UK.

This approach means that, for example, a non-UK resident singles player knocked out of Wimbledon in the first round will receive approximately £50,000 in prize money, but could still end up leaving the UK and going home with a net loss if they have considerable global endorsement income:

The UK income tax in the example above is almost 100% of the UK prize money and, after expenses, creates an effective tax rate of more than 123% against the net cash profit. The tennis player returns home nearly £10,000 financially worse off than when they arrived.

The incurred tax can sometimes be offset against local taxes back in the individual’s home territory. That said, this facility isn’t much use to those individuals living in low tax jurisdictions, such as Monaco, where little or no offset is possible. This can often lead to a significant waste of foreign tax credits.

Tax Exemptions

As part of the bidding process for hosting large sporting events, such as the Olympic and Paralympic Games and the Champions League Final, sports bodies like the International Olympic Committee offer full exemption from income taxes for performances by the athletes and for services provided by other personnel throughout the competition by the host jurisdiction.

It’s almost certain that the UK will need to continue offering similar exemptions to succeed at bidding for major one-off sporting tournaments in future. Curiously though, it appears unlikely that competitors at Wimbledon or The Open will be receiving similar relief anytime soon.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Peter Fairchild is head of Crowe UK’s London private client team.

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