Could the British and Irish Lions trip down under mean double tax on their £100,000 fee?

The starting point for any athlete is determining their country of tax residence as this will usually dictate where their worldwide income is taxed and whether they can claim relief from tax paid elsewhere.

This isn’t always straightforward, especially for globally mobile individuals and different countries which have different rules to determine tax residency. 

UK-based athletes

For UK-based athletes, being a UK tax resident generally means they must report and pay UK tax on all earnings regardless of where they are generated, but there are valuable reliefs available for those who have recently come to the UK.

From there, athletes must consider the tax rules in each country where they compete. Many countries assert taxing rights over income earned within their borders – such as prize money and appearance fees – and this might also extend to a portion of their endorsement or sponsorship income.

Therefore, without proper planning, athletes can face the risk of double taxation where two countries tax the same income. Double Tax Treaties exist between many countries to offer relief from double taxation and the specific provisions of each relevant treaty needs to be considered to establish the appropriate taxing rights.

For example, the rugby players selected for the British and Irish Lions Tour will need to consider the Australian tax implications on the income they earn. 

The British and Irish Lions players resident in the UK will be subject to UK tax on their worldwide income but the Australian tax authority could also seek to tax their match fees as well as a portion of the profit share they receive. 

The Double Tax Agreement between the UK and Australia would give the primary taxing rights over income earned on the tour to Australia, but the players will be able to claim foreign tax credit relief in the UK for Australian taxes properly due under the treaty, therefore avoiding any double taxation.

Advice for the British and Irish Lions

To manage these obligations, sports professionals and their advisers must take a proactive approach to their tax affairs. This includes:

• determining tax residence annually, especially if travel patterns or personal circumstances change;
• considering the tax rules in each country, they plan to compete before they arrive;
• keeping comprehensive records of travel dates, contracts, prize money and fees; and
• coordinating local tax filings in each country where they compete to ensure compliance.

Ultimately, tax compliance across multiple countries is not something athletes can manage alone and it is crucial that they engage specialist tax advisors with cross-border experience to help them navigate the complexities.

In addition to compliance, advisors can help athletes structure contracts, schedule appearances and manage their image rights in ways that are tax-efficient and fully compliant across borders. Just as they would not enter a major tournament without appropriate support, they should not navigate global tax without the right team in place.

*This article was originally featured in the CityAm on Friday 16 May.