HMRC internal manual

Employment Income Manual

EIM64120 - Tax treatment of benefits matches and testimonials given to sportsmen and women - in particular rugby, soccer and cricket players

Professional sportsmen and women are sometimes granted benefits or testimonials which can consist of a benefit match or a series of events throughout a benefit period. The money raised, net of costs, is paid over to the sportsman or woman concerned. In considering the taxation of the proceeds the usual factors relevant to deciding whether a sum is earnings from employment apply (see EIM00600 onwards). The circumstances in which gifts are assessable under section 62 ITEPA 2003 are dealt with at EIM01450.

Where the right to a benefit match or benefit period is written into the contract, or where the player’s club always grants the benefit match or period after a set qualifying period of service, the proceeds are taxable under section 62 ITEPA 2003 as earnings from the employment. There may be an unwritten understanding or a practice within the sport that may not be recorded in the written contract. It is therefore necessary to specifically enquire about any agreement, whether written or verbal, which exists outside the main contract.

Where there is no entitlement to the benefit match or period (see EIM00630) and no custom exists in respect of it (see EIM00640) then the proceeds are not within section 62 ITEPA 2003. This will usually be the case where the match or benefit period is organised by a testimonial committee independent of the club. However, you should not agree that the proceeds of a benefit match or period escape liability simply because such a committee exists. You must first establish the full facts and apply the principles outlined above. The leading tax case on this issue is Reed v Seymour (11TC625). That case established the principle that where a benefit match or benefit period is organised to demonstrate affection and regard for the personal qualities of the player, the proceeds are not earnings and are not sourced in the employment.

Relevant tax cases are:

  • Reed v Seymour (11TC625)
  • Davis v Harrison (11TC707)
  • Corbett v Duff (23TC763)
  • Moorhouse v Dooland (36TC1)
  • Moore v Griffiths (48TC338).

Do not overlook the possibility that the benefit match or period may be connected with the termination of employment so that section 401 ITEPA 2003 applies (see EIM13000 onwards).

Increasingly, a benefit period takes the form of a benefit year and events are staged, usually by an independent testimonial committee, for the player’s benefit. The committee will be an unincorporated association, chargeable to corporation tax and its income must be considered under Corporation Tax rules - see BIM66000 onwards.

From 6 April 2017, the treatment of sporting testimonials was amended to introduce a provision to charge Income Tax on income arising from non-contractual sporting testimonial events (see EIM64121).