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HMRC internal manual

Employment Income Manual

Tax treatment of benefits matches and testimonials given to sportspersons - changes from 6 April 2017

Section 226E ITEPA 2003

Where there is either a contractual right or a customary expectation that an employee who is or has been a sportsperson receives a sporting testimonial, that income already falls within the charge to tax as earnings from the employment no matter who arranges the testimonial. 

From 6 April 2017, section 226E ITEPA 2003 provides for a charge to tax in respect of income from sporting testimonials where no such right or expectation exists for an employed or formerly employed professional sportsperson and the event is organised by an independent testimonial committee or other independent third party to recognise the service of the sportsperson. This means all income arising from non-contractual sporting testimonial events is treated as earnings of the sportsperson and chargeable to Income Tax.

From 6 April 2017, a ‘one-off’ once in a sportsperson’s lifetime Income Tax exemption is allowed for the first £100,000 of sporting testimonial payments made out of money raised by the testimonial providing certain conditions are satisfied (see EIM64122).

The legislation for both the charge and the exemption only applies where a sporting testimonial has been announced on or after 25 November 2015 and only applies for income from events taking place on or after 6 April 2017.

For example, for a series of testimonial events announced on or after 25 November 2015 with events taking place between September 2016 and September 2017, only the payments from events taking place after 5 April 2017 are treated as earnings of the sportsperson and benefit from the income tax exemption.

Where the first relevant activity or event in a series takes place before 6 April 2017, see EIM64120 for guidance on the approach to take.

Where the gross income from a non-contractual sporting testimonial or benefit event (or a number of events comprising a testimonial year) exceeds £100,000 and the independent testimonial committee has responsibility for the disbursement of the income raised, the committee is required to operate PAYE and report the information to HMRC in Real Time Information.

In circumstances where the sportsperson is deceased, anything done for the benefit of the sportsperson’s estate and any resulting payment made to the estate, is to be treated as if  it were earnings of the sportsperson and chargeable to Income Tax. However, income from a sporting testimonial arranged for the deceased sportsperson’s family would not be chargeable to Income Tax within section 226E ITEPA 2003 if the payment is not made to the deceased sportsperson’s estate or representative.