The Chartered Institute of Taxation (CIOT) is concerned that many sports persons will miss out on exemptions that are supposed to guarantee they will receive money from testimonials without tax.
An exemption will be available under the new legislation for the employed sportsperson of up to £50,000 of the income received, either from an individual match or a series of events in a testimonial year. The exemption is available provided that there is no contractual entitlement or ‘customary right’ to the sporting testimonial or benefit match, and that it is being arranged by an independent testimonial committee. The rules were outlined in yesterday’s draft Finance Bill.1
John Cullinane, Tax Policy Director at CIOT, said:
“It is usual in many sports, such as football and cricket, for long time players to receive a benefit/testimonial year/match. This is not pre-ordained or contractual but custom and practice. If this is interpreted as a ‘customary right’ then many lower-paid footballers or cricketers’ testimonials could be liable to tax when in our view the payments should not. This would be a ridiculous situation.
“While we welcome the higher than expected £50,000 exemption because it will support lower-paid sports people, we are disappointed that there is not to be a complete exemption for testimonials where a person’s career is ended due to injury, illness, disability or death.
“It is also disappointing that where proceeds are instead donated to charity by the sports person by way of Payroll Giving or Gift Aid, it has been decided not to confer relief for National Insurance purposes.”
Notes to editors
- Yesterday’s (9 December 2015) draft Finance Bill confirms that income from sporting testimonials and benefit matches for employed sportspersons - irrespective of whether they are arranged by the sportsperson’s club or by an independent testimonial committee - is liable to income tax under PAYE, to the extent that it exceeds or does not meet the terms of the £50,000 exemption. The new rules will apply where the testimonial is granted or awarded on 25 November 2015 or later, and only to ‘events’ that take place after 5 April 2017.
Click on the link here to see an overview of the measures on sporting testimonials (go to point 1.9)