London 2010 – Olympic Income and Corporation Tax Exemptions David Andersen and Greame Perry

London 2010 – Olympic Income and Corporation Tax Exemptions


David Andersen and Greame Perry[1]


The introduction of the 50% higher income tax rate and the way this is applied by the UK Revenue has a significant impact on sports people competing in the UK. One of the conditions for the 2012 Olympics and Paralympics Games being granted to London was that income tax exemptions would be put in place for people coming to the UK in relation to the Games. The draft legislation covering these exemptions has now been published. These will impact on a high number of individuals who will be coming to London for the games with some exemptions coming into force as early as April 2011. We look into these exemptions and how they will be applied below.


UK income tax for non-residents


The high income tax rates in the UK are a problem not only for UK based sportspeople but also for those based outside the country who perform occasionally in the UK. Touring cricket teams for example or athletes competing at UK venues. This is because non-residents still fall within UK income tax on their UK based appearances and earnings. Possibly even more crucial is the fact that the UK Revenue also taxes these individuals on a proportion of their worldwide sponsorship income. The way in which this proportion is calculated has changed over recent years. It used to be that this would be represented by the percentage of the year which the individual spent in the UK. It is now based on the percentage of the individual’s competitive appearances which take place in the UK. By way of example a tennis player who earns £10 million in sponsorship in one year spends two weeks in the UK during that year and in total spends 20 weeks competing worldwide. Under the old scheme they would be subject to UK income tax on 2/56 x £10 million = £357,142. Now they would be taxed based on 2/20 x £10 million = £1 million.


Given the tax position for non-UK athletes, the potential exposure for individuals competing at the 2012 Olympics is high particularly as they will appear on television and be highly visible. This affects not only competitors but journalists reporting on the games and officials sent over by national authorities amongst others. The provisions extend to individuals receiving income via companies and, in the case of sportspeople, are generally not protected by double tax treaties. Most treaties will provide that sportsmen and artists are taxable in the country in which they perform, regardless of their residency.


In order to avoid this becoming an issue, it was made a condition of London being awarded the 2012 Games that an income tax exemption must be introduced. This proposal was approved in the 2006 Finance Bill so that an exemption would be provided for the period of the Games to any foreign competitors and individuals involved with making the games happen. The legislation bringing this into place has now come into force. It has the effect of offering income tax exemptions to numerous people who are officially part of the Games.


Only non UK residents can benefit


In all cases the individual must not be resident or ordinarily resident in the UK during the 2012/2013 tax year (or 2011/2012 for the exemptions which apply from April 2011) in order to benefit from this exemption. Particular care will need to be taken by individuals who have spent significant time in the build-up to the Games training in the UK or making preparations for the games. The definition of UK resident in UK domestic law is not clear and is the subject of current litigation. Where such individuals are resident in a country which has a double tax treaty with the UK this is less likely to be an issue but those who come from countries without such a treaty may find that they qualify as UK resident for the tax year in question. This would prevent them from obtaining this exemption. Individuals falling within this category may wish to consider seeking a clearance from the UK Tax authorities as soon as possible.




The first set of individuals who can benefit from this exemption is the competitors. Where they receive income between 30 March 2012 and 8 November 2012 “wholly and exclusively” in respect of either performing at one of the sporting events or, importantly, for any activity which is “primarily to support or promote” the 2012 games, this will be exempt from UK income tax. It will be interesting to see how this test of ‘primarily to support or promote’ is defined by the authorities to see whether it would include only appearances at promotional events for the Games or could include use of images in adverts for official sponsors of the Games. It should be noted that there is no exemption if income is derived by an athlete who competes in the Games as a result of a contract entered into after 25 July 2012 being two days before the Games will begin.


As mentioned above, a number of athletes will have their affairs structured so that remuneration is received via a company or other entity. The legislation also covers these circumstances so where income for the activity is paid to a third party instead of the individual competitor the payment will still benefit from these exemptions. This will be useful for some people who wish to avoid taxation in their home country and may help to exploit loopholes in double tax treaties with the UK.


Media workers


There are further exemptions for media workers (i.e. television/radio commentators, photographers, technicians etc), representatives of governments, heads of states etc, technicians who repair the various equipment, team officials and technical officials. These individuals can benefit if they have received an Olympics/Paralympics Identity and Accreditation Card. Any income derived from 30 March 2012 to 8 November 2012 from the function they are to carry on at the Games according to the Card they have been provided will be exempt from UK income tax. These individuals may already be exempt from UK taxation under the terms of a double tax treaty. Most treaties with the UK contain an exemption that if an individual spends less than 183 days in the UK during a tax year and receives income from a non-UK employer (and not from a UK permanent establishment of a non-UK employer) this income will not be taxable in the UK. This exemption would only apply to individuals resident in treaty countries however so media workers from many jurisdictions will need to rely on the newly introduced exemption under UK Law.


Other exempt individuals


Also exempt are individuals who perform at the opening and closing ceremonies of the Games.


Employees of organisations responsible for producing the international television and radio transmissions from the Olympics and for organisations who have exclusive broadcasting rights to the Games will benefit from the exemption from UK income tax. This exemption applies for a longer period of 6 April 2011 to 5 April 2013 allowing for a period of preparation and tidying up.


Individuals working for any entities holding association rights will be exempt from income tax on their revenue for their services provided wholly and exclusively for the Games from 30 March 2012 to 8 November 2012.




Helpfully the legislation also provides that any employer whose employees carry out some of the duties mentioned above, e.g. in broadcasting or promoting will not be deemed to have a permanent establishment in the UK simply by virtue of these activities. This should avoid companies falling within UK corporation tax and VAT charges.


Potential Tax Benefits


In certain circumstances individuals may be able to take advantage of any applicable double tax treaty so that no tax is due in any jurisdiction. It may be that exclusive taxing rights are given to the host nation (ie the UK) to tax the individual, in which case any income received in this period could be received tax-free as the tax treaty will prevent the country of residence taxing the individual. Possibilities of weighting an individual’s salary to reflect their responsibilities during the course of the Games may also bear contemplation. Similar considerations apply to companies particularly if their home country does not tax profits earned abroad or a new company structure can be set up for the purpose of income arising from the Games.

[1]David Anderson is a solicitor and tax adviser and Graeme Perry is a solicitor both at Sykes Anderson LLP Solicitors and Chartered Tax Advisers. The authors may be contacted at: and Please note that international tax law is a complex subject and you should not rely on this article without professional advice on the facts of your case.