Professional Sport is global and as such, athletes and sportspeople participate in tournaments, games, and tours in various countries around the world.
Accordingly, it’s not unusual to pay tax in more than one jurisdiction on income earned abroad and the tax issues are not limited to a specific group.
It’s common for sports professionals to earn income in several countries and via multiple income streams, for instance:
Depending on the sport, an individual can be an employee or self-employed, or even both!
Regardless, the onus is on the individual to ensure that both their UK and overseas tax obligations are sufficiently addressed.
UK residents are liable to tax on their worldwide income and the tax system in most countries operates in a similar way.
Furthermore, like the UK, most countries now operate a withholding tax system, which reserves the right to tax visiting sportspersons even if they do not qualify as a domestic tax resident. Notable exemptions include the London 2012 Olympics games, 2024 UEFA Champions League Final and now of course the 2026 FIFA world cup (note it is somewhat narrow), among others.
The UK has three ways of ensuring that residents do not bear a double tax charge:
1.DTT relief can provide entitlement to say a personal tax-free allowance or even provide full tax exemption.
Example: A UK resident golfer playing in the USA earns less than $20,000 and as such, can utilise treaty benefits to reduce the US tax exposure to nil.
2.Unilateral relief works by offsetting the tax paid in one country against the liability calculated in the other.
Example: A UK tennis player participates in the US Open and suffers £100,000 US withholding tax.
The UK tax liability on the same income is £150,000.
The player can offset the amount already paid to the US tax authority against the UK tax, leaving the final UK tax payable as £50,000.
The player receives full (100%) UK tax relief of the foreign tax paid.
It should be noted that relief is restricted to the lower of i) foreign tax paid or ii) UK tax arising on the same income. As the UK imposes a higher tax burden than many other countries, this is not normally an issue for UK tax residents.
There could be other complications, such as the ability to offset US state taxes for example but this is not being considered here.
3.Relief by deduction works by reducing income that is charged to tax, much like claiming expenses. The difference with unilateral relief is that foreign tax is deducted from income and not tax.
Tax relief is therefore realised through less income being charged to tax, saving at the individual’s marginal tax rate.
Example: The same tennis player individual would save UK tax of £45,000 (at the very most – if they pay 45% English additional rate income tax) instead of £100,000.
In practice, relief by deduction is often only used where there are not any profits to tax, so as to make use of the foreign tax paid and increase a tax loss.
Yes! A crucial and often overlooked point is the requirement that an individual making a foreign tax relief claim should take all reasonable steps to mitigate the tax liability in the country in which it’s suffered.
This could consist of filing a foreign tax return, applying for a withholding tax ruling or simply arranging for a refund of tax suffered from the overseas tax authority.
Furthermore, the timing aspect can create a significant problem; the UK tax year end is not co-terminus with many other countries. As such, timing issues resulting for tax returns filings can cause a mismatch of income and tax reporting which can result in foreign tax not being relievable.
Cash flow can be a problem; overseas authorities often impose a flat withholding tax charge on gross income and whilst this can be mitigated later (i.e. by filing a return and claiming expenses), it can present an immediate cash flow hurdle, which can take months to recover.
Ideally, consideration to local tax should be given well before the event take place.
Athletes and sportspeople should keep all records (such as withholding tax certificates) relating to foreign income earned and tax deducted.
They should also ensure they are adhering to and correctly addressing both their overseas and UK tax obligations.
Team sport players (for example footballers and rugby) should obtain confirmation that the employer has taken all reasonable steps (such as securing a withholding tax ruling or filing a tax return) to mitigate the foreign tax exposure and in our experience, this is not always the case.
Individual sportspeople (for example tennis players and golfers) should be particularly cognisant with regards to both meeting their overseas tax obligations and ensuring the correct tax relief amount is being claimed in the UK. The cost and administrative burden of local tax compliance in each jurisdiction can therefore be a real challenge.
Whether you are an athlete, a professional footballer, a boxer, a golfer etc., advice should be sought to determine how best to address the overseas tax obligations whilst also ensuring there are no UK tax complications with any tax credit relief claims.
We are able to identify and correctly make UK tax relief claims as well as dealing with tax enquiries instigated by HMRC. We have a network of contacts in many overseas jurisdictions who can assist with review and tax compliance as required.
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