Sports stars’ tax affairs just business as usual

That was some weekend for sport, no matter what game you prefer. September weekends, especially the first and third Sundays, take the sting out of theworkday routine.

Irish sport is still predominantly amateur in nature, so the coverage is not swamped by talk of enormous salaries and colossal transfer fees.

According to the BBC, UK soccer clubs in the Premier League spent some £870m (€1.18bn) on transfer fees during the transfer window.

With that kind of money floating around, it’s hardly surprising that athletes and sporting bodies of all codes are a source of particular interest to Revenue authorities.

On first principles, all sporting organisations and clubs are treated the same way as any other type of business, and all professional athletes and their managers are treated the same way as any other type of worker.

While we get public displays of their skills, we rarely hear of public displays of an athlete’s tax affairs unless disputes are being sorted through the courts.

Many of these disputes concerned soccer clubs and players.

The man who seems to have set this particular ball rolling (sorry) was a now otherwise forgotten player called Harrison, who used to play for Everton.

He signed up in 1913 under a scheme whereby he’d get a bonus of £650 for every five years he stayed with the club.

He argued unsuccessfully that the bonus wasn’t taxable. For their part the Revenue aren’t slow to have a go either.

The UK Revenue even tried to tax the £1,000 the Football Association gave to the England players as a bonus for winning the 1966 World Cup.

Revenue didn’t succeed that time, perhaps for reasons unconnected to the law.

In more recent times, some big sporting names are more likely to feature for alleged tax fraud rather than a dispute over whether or not a payment should be taxed.

Clubs have been put out of business, and prominent athletes charged. Despite this, honest endeavours by sportspeople are still the norm.

Most of these don’t earn very much, if anything.

Many athletes rely on sponsorship. The very successful few can earn fees from appearances, interviews and endorsements.

There is a special income tax exemption for Irish amateur sports bodies, as long as they confine themselves to promoting an athletic or amateur game or sport and only use their funds to do just that.

This exemption has to be applied for and Revenue publishes a list of the bodies that have been granted this exemption.

The exemption doesn’t extend to an exemption from VAT, and any amateur sports body which has employees will still have to apply PAYE to wages.

There’s also a reasonable line taken on expenses for anyone working for a sporting body in a voluntary capacity.

Travel and subsistence are allowed, provided that they’re paid in accordance with Civil Service norms and purely to allow the volunteer to be in a position to do the work.

In Ireland, professional sports people get caught for tax just like all the rest of us. Unusually though they can apply for an Irish tax rebate on their earnings across ten years of their career when they retire.

The merit of this relief is that it recognises that a professional sports career is short and the earnings from it can come in lumps, rather than in a steady stream. It’s by no means a crock of gold at the end of a career rainbow.

That’s partly because it only applies to Irish income tax paid (while most of the big money is earned abroad) and partly because it applies to performance fees and prizes (and not from sponsorship or endorsements).

While amateur status, volunteering and eventual retirement attract some tax concessions, once you’re outside of these areas all the normal business tax rules apply. Sport is now big business.

And that’s the way the taxman treats it.

  • Brian Keegan is Director of Taxation at Chartered Accountants Ireland


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