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HMRC internal manual

Business Income Manual

Sports testimonials: trading by Testimonial Committee

Sports players are sometimes granted a testimonial by the club for whom they play or the representative sports body. The testimonials are conducted in accordance with the rules of the relevant sports body. Typically a modern testimonial will consist of a series of benefit events over a period of one year, with the aim of raising funds for the sportsperson concerned. The events are usually organised by an independent testimonial committee.

The events typically include benefit matches, golfing days, dinners, ladies’ nights and the sale of testimonial merchandise or brochure space. All are conducted with the aim of raising funds for the benefit of the sportsperson.

The activities undertaken by the testimonial committee to raise funds might, if organised on commercial lines, amount to trading. Guidance on the meaning of trade is at BIM20000 onwards. It will be necessary to establish the facts in each case and align them with the principles established by case law in deciding whether the testimonial committee is trading.

Each activity should be considered separately in deciding whether the receipts from that activity are trading receipts. Typically receipts arising from transactions involving the provision of goods or services for reward will constitute trade receipts if they exhibit the necessary degree of commerciality. Examples might include entrance fees to a football or cricket match, payments for a concert or dinner event and receipts from the sale of merchandise or advertising space.

However, not all receipts will necessarily be trade receipts. Where for example a genuinely voluntary collection is taken from spectators at a benefit game, solely as a measure of personal esteem for the sportsperson, these receipts are unlikely to constitute trade receipts. An entrance fee for an event, described as a ‘suggested donation’, is on the other hand likely to constitute a trade receipt notwithstanding the description used where there is the necessary degree of commerciality.

Where some or all of the activities give rise to trade receipts profits are determined along normal trade profits principles and the testimonial committee is accountable for the tax on those profits. The net proceeds are then available for payment to the beneficiary. This payment is not itself an allowable deduction. It is an application of profits after they have been earned, not an expense incurred in earning those profits.

Where the testimonial committee is an unincorporated association (see CTM41110) the committee is within the charge to Corporation Tax on any chargeable income it receives such as bank interest and trading profits.

Whether the sportsperson beneficiary is liable to tax on the net proceeds received by him or her is considered at EIM64120.