UK taxation of non-UK resident sportspeople and entertainers

The UK regularly welcomes international sportspeople and entertainers to take part in competitions and performances. An important consideration is the UK tax treatment of non-UK resident sportspeople and entertainers, and compliance with specific UK rules relating to them.

Who is affected by the non-UK resident sportspeople and entertainers rules

Any non-UK resident sportsperson or entertainer performing or competing in the UK is caught.

What the rules mean for non-UK resident sportspeople and entertainers

Under these rules, non-UK resident sportspeople and entertainers are liable to UK tax on any payment which relates to their UK appearance, as well as a proportion of earnings (such as sponsorship or endorsement income) from worldwide activities based on time spent in the UK.

This applies whether the engagement is with the individual direct or with a third party, such as their personal service company.

The income liable to UK tax includes all prize money relating to the UK appearance as well as a proportion of worldwide sponsorship and endorsement income. The proportion of income taxable in the UK is calculated using one of two methods of calculations which compare the number of UK days to either the worldwide appearance days or the worldwide appearance and training/rehearsing days.

For the individual, where payments made exceed the basic rate tax bracket, the income is liable to tax at higher rates. It is also possible that an income tax repayment may be due, as tax deductible expenses can be claimed that are not taken into account unless an advance agreement is made with HMRC. Where this applies, the sportsperson or entertainer should complete a self-assessment return to account for any additional liability or claim a repayment of tax.

Relief for UK taxation will likely be available in the sportsperson’s or entertainer’s home country against the home country liability under double taxation agreements. Different rules apply where the sportsperson or entertainer is regarded as an employee.

Withholding tax

Payers are required to deduct withholding tax at the basic rate (currently 20%) from fees and associated payments relating to the UK appearance. Payers are also required to deduct withholding tax from any expenses paid which involves “grossing up” the expenses to ensure the correct amount of withholding tax is deducted.

Where payment chains are involved, each party in the chain making payments is required to deduct withholding tax unless a special arrangement has been made with HMRC. An application can be made to HMRC to agree a withholding tax rate so that broadly the tax collected is equivalent to the actual tax liability. This application should be made at least four weeks in advance.

With the requirement to deduct withholding tax comes a raft of reporting and compliance requirements for payers.

How Moore Kingston Smith can help

We help payers, sportspeople and entertainers navigate the UK tax rules to ensure that the compliance and reporting requirements are met as well as considering planning approaches.

Please get in touch with our experts to discuss the above or explore how Moore Kingston Smith can assist you.