BOLT CRITICAL OF UK TAX REGIME (15/08/12)

When Usain Bolt crossed the line after setting a world record – and winning a third gold medal – at the London 2012 Olympics, BBC reporter Phil Jones asked him the million dollar question: “Will we see you in Britain again?” With his trademark grin Bolt said it was unlikely “as it costs too much money!”

You could be forgiven for thinking a multi-million dollar earner like Usain Bolt wouldn’t think twice about competing in the UK. But Britain’s arcane tax laws make it far less affordable to don his spikes here than in more benign tax regimes overseas.

So what’s the problem? The challenge for global sports stars like Bolt, Michael Phelps, Rafa Nadal and the like is that they are taxable in the UK when they come here to perform on their direct winnings and appearance fees from events. But in addition the Revenue says they are taxable on a proportion of their sponsorship and endorsement earnings.

For the likes of Bolt and Phelps, not to mention the US basketball squad, this is serious money indeed. Furthermore, the proportion of worldwide income taken into account has in the past been calculated on the basis of days spent competing, so that an athlete (in the widest sense) who restricts his or her competitive appearances could finish up having a very large amount of income brought into the UK tax net.

A great example of this is that Usain Bolt was invited to compete in a UK athletics event for a £100,000 fee, but his management worked out that by the time they had allocated his sponsorship and endorsement income to the UK, his tax liability in the UK would exceed his appearance fee. You don’t need a lightning bolt to realise why he might not want to accept!

Bolt's response to this threat has been as straightforward as most of his races; he simply decided to stay away: Olympic aside, he has not raced in the UK since 2009. And he has not been the only one.

British golf fans have had to make do with far fewer opportunities to watch the world's best foreign talent on our courses, and tennis followers have had their Rafael Nadal rations reduced.

Nadal did not play at this year's Aegon Championships at Queen's Club, his traditional warm-up event before Wimbledon, due to the UK's tax demands.

He told the Times: "I like to play in all the tournaments where they really want me. It is good for tennis. There is a big change in Halle, they have wanted me to be there for the last few years but I really wanted to play in Queen's.

"The truth is, in the UK you have a big regime for tax - it's not about the money for playing. They [HMRC] take from the sponsors, from Babolat, from Nike and from my watches. This is very difficult. I am playing in the UK and losing money. I did a lot more for the last four years, but it is more and more difficult to play in the UK."

So how come we saw the world’s elite sportspeople in London? One of the conditions for the capital being awarded the Olympic Games was that the UK undertook to exempt Olympic competitors from this tax regime in respect of their Olympic appearances.

A similar exemption applied to the 2011 Champions League Final, and will also apply to the 2013 Final and the 2014 Glasgow Commonwealth Games (so we may yet see Bolt, Blake etc. back in the UK).

The Government has tried to wave an olive branch in the direction of the sporting elite: in his Budget speech in March, Chancellor of the Exchequer George Osborne announced "training days" would now be taken into account when HMRC makes its assessments.

So, instead of dividing UK competition days by worldwide competition days, the sum is now time spent in the UK training and competing, divided by time spent training and competing anywhere.

It’s a smaller number, certainly, but was not small enough to get Bolt to July's London Grand Prix – or back for Birmingham later this month.

The reality is that the Government sees a steady stream of revenue from high-class sporting events and is unlikely to change its view – at least in the medium term. Until it does, we will have to watch the world’s best do battle on the small screen!