Category: Taxation

£100,000 tax exemption for sporting testimonials

By Colin Burns

01 May 2018

HMRC has published updated guidance on the tax treatment of income from sporting testimonials, which confirms there will be a new ‘one-off’ exemption of £100,000 designed to ensure that employed sportspeople on modest incomes are protected from the recent changes to the rules.

All income from sporting testimonials and benefit matches for an employed sportsperson is chargeable to tax and National Insurance contributions (NICs).

However, HMRC now says this treatment will be subject to a ‘one-off’ exemption of £100,000 of the income received from events held during a single testimonial or testimonial year. The exemption will apply to income arising from relevant events held in a maximum period of twelve 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.

Where there is a contractual entitlement or customary right to the sporting testimonial or benefit match then this exemption will not apply.

Independent testimonial committees will now need to operate PAYE where the total proceeds from a non-contractual sporting testimonial or benefit match (or a number of events comprising a testimonial year) for an employed sportsperson exceed £100,000.

The measure will take effect for the income received from non-contractual / non-customary sporting testimonial events held on or after 6th April 2017 where the testimonial has been awarded on or after 25th November 2015. Income from sporting testimonial events held on or after 6th April 2017 where the testimonial or benefit match was awarded before 25th November 2015 will be subject to existing arrangements.

HMRC’s research indicates that some 220 sporting testimonials or benefit matches are held annually, but of these a much smaller number are held for professional sportspersons who are not self-employed.

Whilst the change may not have much of an impact on high profile sportspeople receiving large sums, it will help the likes of cricketers and rugby players in minor leagues where the testimonial is a significant sum to aid the transition to a non-playing career and will undoubtedly be welcome. Not providing a contractual commitment to arrange such a testimonial will present a challenge to many clubs. It also remains to be seen how HMRC determine what is a ‘customary’ testimonial.

By contrast, under the original plans in the 2015 Summer Budget, sportspeople were to receive only the first £50,000 of payments tax-free.

If you would like more information on this topic, please get in touch with your usual Gerald Edelman contact or with Colin Burns at or on 020 7299 1407.

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