Tax Issues in Sports Law.

In the UK.
The most common sources of income in sports industry are as follows:

Cash earnings including bonuses;

Payments for the use of copyright;
Competition prize in cash;
Appearance money;
Exhibition matches and competitions;
Sponsorships and endorsements;
Promotions and personal appearance;
Writing and broadcasting;
Images rights payment;
Royalties.

The main sources of taxable income are likely to be:

Income from employment with the sports club;

Any internal income from sponsorship, merchandising;

The main reliefs and allowances are:

The basic personal allowance;

Payments to charity

Special types of income and expenditure

1. Inducement payment
To induce people to employed by a particular club
Historically, tax-free inducement payments and signing-on fees have been
allowed under rules of rugby and football and the courts have upheld tax-free
treatment of their capital nature.
The commercialization of sports in recent years means that nowadays tax-free
status in this regard is unlikely to be available. Signing-on fees paid to
professional footballers are made available under their contracts and fully taxable.
2. Prizes
Prizes and voluntary payments are normally subject to tax as earnings where the
individual participates with the prize in mind

In a more pragmatic approach adopted by HMRC where occasional prizes are

received, etc in form of trophies where the value is not substantial and as such, tax
may be avoided.
Since an international footballer succeeded in justifying his claim not to be
taxable on payments from English Football Association and a third party
following his performance in World Cup 1966, prizes are not always taxed;
Moore v Griffiths (1972) 48 TC 338

3. Termination payments
Generally, where a termination payment of certain amount is made outside of any
contractual provisions, it must be tax-free.
To qualify, the sportsman must not be entitled to the payment under the contract
nor be promised the payment orally.
4. Expenses and benefits
Subject to a claim for business expenses incurred wholly exclusively and
necessarily in the performance of the duties of their employment.
Deductible business expenses would include travel and subsistence e.g travel to
competitions and away matches, and overseas trips and costs.
5. Sponsorships
Normally, the arrangements will be evidenced in writing and will be taxable as
part of the self-employers total income from sport.
If he or she is employed then the sponsorship arrangement which is unconnected
with the employing club could be treated as self-employed income.
Some sponsorship may be taxed as employment income under the contractual
arrangements entered into, but this is unlikely to be common.
Tax relief may be available either by way pf an expenses claim in the case of
sportswear or by way of capital allowances if equipment is provided.
6. Merchandising and image rights
Counted as taxable income

7.