All income from sporting testimonials and benefit matches for an employed sportsperson is chargeable to tax, and National Insurance contributions (NICs).

However, HMRC now says this treatment will be subject to a ‘one-off’ exemption of £100,000 of the income received from events held during a single testimonial or 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.

Where there is a contractual entitlement or customary right to the sporting testimonial or benefit match then this exemption will not apply.

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.

The measure will have effect for the income received from non-contractual / non-customary sporting testimonial events held on or after 6 April 2017 where the testimonial has been awarded on or after 25 November 2015.

Income from sporting testimonial events held on or after 6 April 2017 where the testimonial or benefit match was awarded before 25 November 2015 will be subject to existing arrangements.

HMRC’s research indicates that some 220 sporting testimonials or benefit matches are held annually, but of these a much smaller number are held for professional sportspersons who are not self-employed.

The change in the rules has been welcomed by UHY Hacker Young, which says that older and retiring sports players will benefit substantially from the tax-free allowance as testimonial incomes can be significant six-figure sums. These funds can help many players better bridge the gap between playing sports professionally and their next career move.

Elliott Buss, partner at UHY Hacker Young, said: ‘While benefit matches for higher-profile stars often make the headlines, testimonials are an important source of income for many players across all leagues. Most big name sports players already donate substantial amounts of the money they earn from testimonials to charities.

‘Testimonial seasons and games are an important way for clubs and fans to show their gratitude to players than have shown loyal service to their team.’

Under the original plans in the 2015 Summer Budget, sportsmen were to receive only the first £50,000 of payments tax-free.

Income Tax: update to - treatment of income from sporting testimonials is here.

Report by Pat Sweet