Sport is a vital part of the UK's culture and in recognition of this, the UK Government has in recent years enacted exemptions designed to ensure that foreign athletes competing in major sporting events in the UK are not subjected to UK taxes on income.

The most notable recent events in which foreign athletes benefitted from UK tax exemptions were the London 2012 Olympic and Paralympic Games. The UK Government also enacted tax exemptions for foreign competitors in both the 2011 and 2013 UEFA Champions League finals held at Wembley.

In order to help prolong the legacy of the London 2012 Olympic and Paralympic Games and spread part of that legacy to Scotland, the UK Government is introducing tax exemptions for competitors at both the London Anniversary Games (to be held in July 2013) and the Glasgow 2014 Commonwealth Games. These exemptions are expected to be enacted by Finance Act 2013 and are similar to those provided to non-resident competitors in the London 2012 Olympic and Paralympic Games.

The exemptions will apply to "accredited competitors" – essentially athletes who have been issued an athlete's accreditation card by UK Athletics (in the case of the London Anniversary Games) or Glasgow 2014 (in the case of the Commonwealth Games). Accredited competitors must be non-UK residents for tax purposes. For the London Anniversary Games, the exemption will apply to activities performed from 21 July 2013 until 29 July 2013; in the case of the Commonwealth Games, the exemption applies to activities performed from 4 March 2014 to 3 September 2014.

The exemptions, however, are not "blanket" exemptions in that they only apply to income arising from certain specific activities – namely competing at the London Anniversary Games and the Glasgow Commonwealth Games and any other activity, the main purpose of which is to support or promote the London Anniversary Games and the Glasgow Commonwealth Games. So non-UK resident athletes who, while in the UK for one of these events, undertake activities giving rise to non-event income (eg endorsement income) would still need to consider whether those activities might be subject to UK tax.

The UK tax authorities (in line with most other mainstream jurisdictions) generally seek to tax non-UK resident competitors on prize money and appearance fees attributable to events held in the UK. However, they also seek to tax a proportion of an athlete's global endorsement income and famously won a case against Andre Agassi in 2006 on this very matter. The impact of the UK tax authorities' approach saw Usain Bolt declining to take part in the Aviva London Grand Prix in 2010 and Rafael Nadal not taking part in the AEGON Championships at the Queen's Club. The ATP were also rumoured to have considered moving the World Tour Finals from London in 2014, though they eventually agreed to extend London's hosting of the event until 2015.

It is common these days that when seeking bids to host a major sporting event, the event organiser will require the bidder to secure tax exemptions for competitors participating in that event. Because of the approach of the UK tax authorities to the taxation of foreign sportspeople, what we are now seeing in the UK is individual sports lobbying both the UK Government and the UK tax authorities for specific event exemptions, such as those to apply to the London Anniversary Games and the Glasgow Commonwealth Games. Without such exemptions, the concern is that the value of major sporting events held in the UK could be eroded if those events are unable to attract the world's best athletes to compete. Interestingly, foreign players coming to England for the 2015 Rugby World Cup are apparently not in line to benefit from any UK tax exemptions, after a UK Government source confirmed that exemptions are agreed on a case by case basis and there has been no application for the Rugby World Cup.

So as specific UK tax exemptions are given in many cases, could one now argue that the time has come for a comprehensive UK tax exemption to be enacted for all major sports events to be held in the UK? These events bring a substantial economic benefit to the UK economy and provide the positive social impact of hosting major events and being able to witness major sports stars in the UK. Any loss of tax would be a small price to pay in comparison.

© DLA Piper

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