We were fortunate enough to obtain a significant number of Olympic tickets in the much-criticised ballot, and have thus spent most of the past fortnight watching football in Manchester and a dozen varied sports in London. Despite best endeavours we did not manage to see Usain Bolt run, although we did see Michael Phelps win his final gold medal and receive his special FINA award.
Needless to say there is a tax angle to the appearance of high profile non-UK resident sportsmen and women in the UK, which helps to explain why the Olympics was such a rare opportunity to see some of the biggest names in athletics and swimming in particular. The UK does not only tax appearance and prize money, as many countries do, but also taxes a proportion of an individual’s endorsement income, which for the likes of Bolt and Phelps, not to mention the US basketball squad, is serious money indeed. Furthermore, the proportion of worldwide income taken into account has in the past been calculated on the basis of days spent competing, so that an athlete (in the widest sense) who restricts his or her competitive appearances could finish up having a very large amount of income brought into the UK tax net.
To illustrate this, Usain Bolt was invited to compete in a UK athletics event for a £100,000 fee, but his advisers calculated that if he accepted, the impact of the UK tax system would be such as to levy a tax liability in excess of the fee on offer. Such a marginal tax rate in excess of 100% is of course utterly unacceptable in any sensible tax regime, but that is the system we had.
One of the conditions for London being awarded the Olympic Games was that the UK undertook to exempt Olympic competitors from this tax regime in respect of their Olympic appearances. A similar exemption applied to the 2011 Champions League Final, and will also apply to the 2013 Final and the 2014 Glasgow Commonwealth Games (so we may yet see Messrs Bolt, Blake etc. back in the UK, which is good news for those of us who intend to go).
The UK is also relaxing its approach to assessing the proportion of endorsement income liable to UK tax, by taking into account training days as well as days in competition. Given the level and intensity of training necessary for many top athletes, this will radically reduce their exposure to UK tax in respect of appearances at non-exempt events (e.g. Wimbledon, Ryder Cup, British Open).
This will be good news for UK sports fans who have become accustomed to seeing the world’s best over the past couple of weeks, as it will mean that lower profile events will stand a better chance of attracting higher profile sports stars, who may not give this country as wide a berth as they have done in the years since this legislation was enacted. And if the objective of the Olympics to “inspire a generation” is to come to long-term fruition, that has to be very good news indeed. And given the unlikely spectacle of my children playing handball in the garden at the weekend, it is an objective that may just be attainable.