Bolt’s Legacy: a tax-fuelled thunderbolt
Mike Fleming, tax director at Straughans Chartered Accountants, looks at Usain Bolt’s decision not to compete in UK athletics events until tax legislation changes; and the less-than-appealing legacy this leaves UK sport.
Not content with dominating the track at the Olympics and cementing his self-confessed status as a ‘legend’, the Jamaican sprinter Usain Bolt has stuck a thunderbolt into the heart of the UK sports industry by confirming his decision not to compete in the UK again unless changes are made to tax legislation.
As a nation, we are basking in the international recognition of our success in hosting a Games that, according to The Australian, ‘knocked Sydney off its pedestal’. Years of careful planning and investment went into creating an Olympics that would not only be spectacular and slick, but which would also put the UK firmly on the map as a prime destination for world-class sport.
Now this long-awaited legacy has come to pass, Usain Bolt’s announcement has thrown a spanner in the works which could threaten to derail our chances of attracting international sports stars to UK events. Far from writing the UK’s name in lights as the ultimate host nation, Bolt’s parting shot could result in a much less appealing legacy. Unless tax legislation changes, other sporting superstars may decide to follow Bolt’s example and the UK may be unable to host sporting events of this calibre in future.
Bolt’s objection to competing in the UK is that in addition to being taxed at 50% on his earnings in the UK (which is standard in most countries), HM Revenue and Customs also claim tax on a proportion of his worldwide sponsorship and endorsement earnings. While this might seem fair, in fact Bolt claims that the amount of income he is taxed on is disproportionate, as he earns around £10 million but only competes on about 10 days a year. This arrangement means that it actually costs Bolt and other athletes of his status money to compete in the UK, as their tax liability way exceeds any appearance fee they receive. HMRC agreed during the original bid process to waive tax during the Olympics, which is why Bolt was able to compete.
Bolt is not the only international sportsperson to make a stand on this issue. Tennis ace Rafael Nadal also refused to play at the Queen’s tournament this year for tax reasons. The jury is out as to whether the government will bow to pressure to relax this legislation – or even as to whether it should. After all, given the ever-increasing costs of hosting sporting events, isn’t it only fair that HMRC gain a cut of the worldwide income of the sports stars our events help to create? There is talk of HMRC taking ‘training days’ into account when calculating the taxable income from global sponsorship and endorsements, but I personally will be surprised if this concession is enough to attract Bolt and his cohort back to the UK.