29 Apr 2010
As many of you who saw the Athlete Tax presentations will know, the rules for Athlete Tax are quite complicated and are still an evolving topic. We have recently launched a new website that should help make life easier for assessing your tax status and understanding the rules. However before we tell you more about the website, we just wanted to feedback on this year’s process:
This year’s tax return process has confirmed two key aspects of the Tax legislation:
1. Athlete expenses must first be offset against the Athlete Personal Award (‘APA’) (i.e. Lottery Award) received in the year. Excess expenses (i.e. above the APA) can then be set off against other sport related income if the Athlete is trading with a view to a profit. If there are still excess expenses after offsetting against other sporting income, they can be reclaimed as a credit against future taxable sporting income or offset against other income in the year (if tax has been paid).
2. Only Professional Athletes can make a claim for excess expenses. You will recall that a Professional Athlete is someone who is trading with a view to a profit (either now or in the near future).
These aspects of the tax legislation have led to a lot of confusion during the last year.
Further Points:
• For many Athletes, although their expenses are high, they are often below the APA. The APA is a grant to cover sporting and living expenses.
• Even Athletes who have high expenses, will need to justify that they are trading as a professional, i.e. they are trying to (or will) make a profit from their sport. This is a double edged sword as potentially the APA awards of professional athletes may also become taxable.
• Athletes need to maintain good records of their income and expenses. The standard of records that have been sent to us this year has been inconsistent. It is your responsibility to keep records of your income and expenses.
• Athletes do not have as many expenses as they first thought. Many Athletes thought they could claim lots of expenses back, but actually many are either covered under the APA or are reimbursed by their governing body.
• Many Athletes have left it to the last minute to seek help and advice. Nearly 65% of the calls and enquiries were received in January 2010. The deadline for submission of the tax returns was the end of January 2010!
• Athletes should monitor their tax situation on a regular basis (at least annually) as their situation can change quickly. One big win, or sponsorship deal could tip the balance on reaching a professional athlete status and therefore a tax bill!
• All of the Athletes that have been through the process are now assured that their tax status is correct (at least for the 2008-9 year) and many of those who went through the process are also correctly registered for National Insurance. So there has been a benefit for them all.
Some key statistics from this year’s round of tax returns:
• 36% of the Athletes reviewed needed to complete a tax return.
• Of that 36%, 77% of them actually had to pay some tax, whilst 23% received a refund or a tax credit against future taxable income.
• 64% therefore did not need to do a tax return, or there was no immediate benefit for them to complete a tax return.
• However, 20% of those that did not need to complete a tax return for 2008-09 will probably need to complete a tax return for this current tax year (2009-10).
These statistics suggest there are winners and losers from the Athlete Tax process, and that the actual tax situation is very much an individual process. We have seen Athletes in the same squads or teams and some have had tax bills whilst others have not been required to submit returns at all. It really all depends on the individual’s personal circumstances.
We have spoken to many Athletes about the Athlete Tax process and have taken on board the feedback that we have received. We have therefore created a new online Athlete Tax tool that will help you assess your tax situation on an ongoing basis. The website: www.AthleteTax.com will provide you with all the information that you need, and also has a simple tool that will give you an online opinion of your need to complete a tax return and your overall tax status. We encourage all Athletes to use this service as a first point of call. Where you have further questions or need more detailed information, please either contact your local Performance Lifestyle Advisor or GMS directly.
The EIS, BAC and GMS teams want to make sure that you benefit from the tax process but we also have an objective that, as Athletes, you operate within the rules of the tax system. Please make use of the advice that is available to you.
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