Playing by the rules: UK tax law for non-resident footballers

Several high-profile cases have hit the front pages in recent years detailing footballers who have breached tax laws. In 2016 Lionel Messi was given a 21-month suspended prison sentence (later reduced to a €252,000 fine) and forced to pay €5 million in back taxes by the Spanish government after he and his father Jorge were found guilty of tax fraud.

Although there has not been a case of quite the same high profile in the UK, HMRC launched investigations into 329 professional footballers for suspected tax avoidance in 2021/22 - over three times as many as the season before.

It is paramount that clubs, footballers, and agents stay abreast of tax laws so as not to fall foul of any changes, as doing so could have severe consequences.

Here is a short breakdown of how UK tax law works for non-resident footballers and other elite athletes:

The law

If an athlete is in the UK for less than 46 days in any tax year, they will be considered 'automatically non-resident' for tax purposes. While they will be considered tax resident outside of the UK, the UK's 'source basis' tax rules will apply to these athletes, and they could still incur significant tax liabilities on their UK-obtained income.

If an athlete's income exceeds the personal allowance of £12,500, there is an obligation to withhold a basic-rate income tax of 20% from the athlete's income. If the athlete's income exceeds the basic rate band (including bonuses, sponsorship and any other income), then the higher (40%) and additional (45%) rates of income tax will be applied.

Athletes may be able to take off' deductible expenses' from their income to lower the amount of tax payable. These may be travel, accommodation or coaching expenses.

It is worth noting that, unlike most other countries, the UK apportions part of the athlete's global endorsement income to their UK performances and taxes the UK-related portion.

Are any exemptions available?

The International Olympic Committee (IOC) states that the host nation must provide a full exemption from income tax for all athletes competing at the Summer Olympics.

These exemptions, however, do not apply to other one-off major tournaments such as Wimbledon or major football finals. The UK has been known to grant exemptions for these events in the past - however, it is still uncommon.

Athletes are encouraged to seek financial advice from a professional on what exemptions may be available.

Comparison with other countries

The US and France have similar laws on taxes earnt through sporting income; a portion of income tax is due at their applicable tax rates.

Many other countries are more relaxed on the taxation of international athletes. Spain, for example, won their bid to host the 2010 Champions League Final because its tax laws were more favourable than the UK's.

Guidance

We would encourage any footballer or other elite athlete to plan carefully. As athletes in the UK for 46 days or more may be taxed as 'residents', it is vital to keep a record of how many days they have spent in the UK earning income from their sporting activities. This includes training as well as competing in the UK.

We would also recommend that you seek professional advice. An expert in tax and sports law can be worth their weight in gold if their advice helps an athlete reduce their income tax liability in the UK.

Understanding how the UK tax laws operate can allow an advisor to help the athlete plan their professional career accordingly to maximise their income - important to those athletes with short career projections and young families.

Contact our sports law solicitors

If you have any questions regarding sports law, please do not hesitate to contact our team.

We have sports law solicitors in London, Brighton, Eastbourne, Hastings, Uckfield, and Ulverston, and we work with footballers and elite athletes across the UK.

Important note: The contents of this article do not constitute legal advice and are provided for general information purposes only.