The ATT’s comments are made in response to HMRC’s consultation on proposals to tax all income from testimonials and benefit matches, which are traditionally organised to celebrate the end of an individual’s career. The consultation, Tax treatment of income from sporting testimonials – proposals for legislation, ends next week on 2 September.

 Currently, a favourable tax treatment applies when testimonials or benefit matches are arranged by an independent committee rather than the club or team for which the individual played.  In this instance, all public donations received by the sportsperson are free of income tax and national insurance contributions (NIC). However, HMRC have become concerned that this treatment no longer reflects the modern world of sport and intends to subject all such payments to income tax and NICs subject to a limited exemption.

Paul Hill, chairman of the ATT’s technical steering committee said: ‘If HMRC is intent on taxing testimonial donations, then we welcome the introduction of an exemption. Subject to it being set at the right level, that should protect the payments made to the many sportspeople who are on very significantly lower levels of pay than the headline-grabbing amounts paid to elite professionals. ‘However, we are keen to see certain situations removed from the tax system altogether.

'In particular, where careers have been cut short prematurely due to injury or ill-health we believe there should be a complete exception from any tax or NIC liability.  Any employee (in any job) whose employment is terminated by reason of injury or disability is entitled by law to receive an unlimited termination payment completely free of tax and NIC. A similar treatment should be applied to testimonial payments made in comparable circumstances.’

 Hill said the ATT disagreed with HMRC’s argument which seeks to compare the donations made by the public at sporting events to tips left by the public in restaurants or given to taxi drivers.

‘We believe that the two situations are not comparable as testimonial donations represent a fan’s accrued appreciation for a particular sports personality. Tips are usually a generic form of appreciation and the personal identity of the recipient is usually not a factor,’ he said.

ATT wants HMRC to amend the proposals to identify situations where the traditional custom of a sports testimonial does still exist, and to create exceptions to the tax and NI rule for anyone whose career is brought to an end through injury or ill-health.

HMRC’s consultation, with a closing date for comments of 2 September, is here

ATT’s response is here

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