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  • Sport Tax Update: HMRC, Odd-shaped Balls & Varnish-ing One’s Status

    19 December 2018

    Andy Wood

    It’s perhaps unsurprising that, given the sums in broadcast rights, sponsorship income and salaries, sport seems to have become more of a priority for HMRC in recent years.

    Of course, this is not necessarily an entirely new departure.

    The Revenue’s attempts to lay claim to some of the riches paid to some of football’s star players in image rights may have been thwarted by a notable judgement in 2000.

    Even so, as I have mentioned previously on this ‘blog, HMRC hasn’t simply let the matter drop.

    In October, it emerged that 171 players, 44 clubs and 31 agents were being investigated for a range of issues, including alleged “image rights abuse”. At the same time, MPs were pressing the Treasury for a change in the law to increase its share of football’s riches, having already seen HMRC claim £332 million in “additional” tax income from the sport since 2015.

    Football has, though, not been the only professional sport to benefit from success.

    Following the decision of Rugby Union to become professional in 1995, some of its elite performers have become household names and, consequently, very wealthy.

    However, HMRC has been attracted by claims of irregularities even below that sport’s top flight.

    One newspaper report suggested that clubs in National Leagues One and Two had been contacted following concerns that they may not, if you like, have been playing by the tax rules, at least.

    A spokesperson for the Revenue said that it was seeking “to ensure their processes and payroll is correct”.

    Such scrutiny is now not confined to the high-profile ball sports either.

    I reckon that HMRC has been paying no little attention to the evidence provided during an employment tribunal in Manchester involving Britain’s former European team sprint cycling champion, Jess Varnish.

    She has been attempting to argue that her being dropped from British Cycling’s elite programme amounted to wrongful dismissal and sexual discrimination.

    To do so, of course, she needs to persuade the tribunal that she was effectively employed by the federation.

    In his evidence, British Cycling’s former team doctor, Richard Freeman, appeared to agree, explaining how cyclists making the were very firmly controlled” by their coaches.

    If Jess Varnish prevails with her argument, the implications could be considerable not just for cycling but for other sports whose top men and women receive funding in return for submitting themselves to intensive and centrally-organised development programmes.

    A very similar predicament is currently being played out in wide world of employment outside of sport. 

    Having already imposed tougher so-called IR35 rules governing the use of freelancers on the public sector in April last year, the Government has just announced that those changes are to be extended to the private sector.

    The shift means more administration for those using contractors as well as the prospect of higher tax bills for contractors themselves. It has already resulted in ETC Tax handling a large number of enquiries from companies and freelancers alike.

    Sport, like business, is a high-pressure environment and some athletes will no doubt argue that dealing with HMRC’s attention means that they’re not entirely focused on their discipline of choice.

    Any distraction would possibly be a disaster for British Cycling, which has built its success of recent times on a strategy of making cumulative “marginal gains”. It’s an approach which has led to 22 team or individual titles at the last three Olympic Games in Beijing, London and Rio de Janeiro in the process.

    Whatever the ruling on Jess Varnish’s claim, it might find itself under uncomfortable pressure not from its international rivals but, instead, from HMRC officials with their eyes on a very different but no less satisfying kind of gold.

    If you have any queries around sport tax, or any other tax matters, then please get in touch.