Budget 2016: income from sporting testimonials liable for income tax

As announced at Autumn Statement 2015, the Chancellor confirmed in the Budget that legislation will be introduced in Finance Bill 2016 to confirm that income from sporting testimonials and benefit matches for employed sportspersons, irrespective of whether they are arranged by the sportsperson's employer or by an independent testimonial committee is liable for income tax

This legislation will apply to testimonials which are non-contractual or non-customary and where the testimonial has been granted or awarded on or after 25 November 2015 for income from events taking place on or after 6 April 2017.

Testimonials granted or awarded under contract or custom are already subject to income tax and will not be affected by the new legislation.

Following consultation on the draft legislation, the ‘one off’ exemption previously announced of £50,000 has been increased to £100,000.

This applies from 6 April 2017 to an employed sportsperson against income from sporting testimonials which are non-contractual or non-customary. This will apply only to a single testimonial (which may consist of one or more events in a testimonial year).

The exemption will apply to income arising from relevant events held in a maximum period of 12 calendar months only, beginning with the date the first event is held in a 'testimonial year', even if that year straddles more than one tax year. If the level of the income arising from the testimonial or testimonial year falls below the value of the exemption, the amount of the unused exemption will not be available to carry forward to a future sporting testimonial or benefit match for the sportsperson, or against any other testimonial events held after the end of that 12 month period.

Separate corporation tax provisions to take such testimonial income out of charge if appropriate will also be introduced in Finance Bill 2016.

Further legislation will also be introduced before 6 April 2017 to confirm the National Insurance treatment of income subject to the new legislation and to make some further consequential amendments.

Independent testimonial committees will now need to operate PAYE where the total proceeds from a non- contractual sporting testimonial or benefit match (or a number of events comprising a testimonial

year) for an employed sportsperson exceed £100,000.

Finance Bill 2016 will also introduce legislation in Corporation Tax Act 2010 that will enable an independent testimonial committee that is chargeable to corporation tax to deduct sums paid to, or for the benefit of, the employed sportsperson, and associated PAYE and any NICs liability, from the committee's taxable profits.

HMRC’s income tax update on the treatment of sporting testimonials is here

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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