Professional sportsmen and women are sometimes granted benefits
or testimonials which can consist of a benefit match or a series of
events throughout a benefit period. The money raised, net of costs,
is paid over to the sportsman or woman concerned. In considering
the taxation of the proceeds the usual factors relevant to deciding
whether a sum is earnings from employment apply (see
EIM00600 onwards). The circumstances in
which gifts are assessable under Section 62 ITEPA 2003 are dealt
with at
EIM01450.
Where the right to a benefit match or benefit period is
written into the contract, or where the player's club always grants
the benefit match or period after a set qualifying period of
service, the proceeds are taxable under Section 62 ITEPA 2003 as
earnings from the employment. There may be an unwritten
understanding or a practice within the sport that may not be
recorded in the written contract. It is therefore necessary to
specifically enquire about any agreement, whether written or
verbal, which exists outside the main contract.
Where there is no entitlement to the benefit match or period
(see
EIM00630) and no custom exists in
respect of it (see
EIM00640) then the proceeds are not
within Section 62 ITEPA 2003. This will usually be the case where
the match or benefit period is organised by a testimonial committee
independent of the club. However, you should not agree that the
proceeds of a benefit match or period escape liability simply
because such a committee exists. You must first establish the full
facts and apply the principles outlined above. The leading tax case
on this issue is Reed v Seymour (11TC625). That case established
the principle that where a benefit match or benefit period is
organised to demonstrate affection and regard for the personal
qualities of the player, the proceeds are not earnings and are not
sourced in the employment.
Relevant tax cases are:
Do not overlook the possibility that the benefit match or period
may be connected with the termination of employment so that Section
401 ITEPA 2003 applies (see
EIM13000 onwards).
Increasingly, a benefit period takes the form of a benefit
year and events are staged, usually by an independent testimonial
committee, for the player's benefit. The committee will be an
unincorporated association, chargeable to corporation tax and its
income must be considered under Corporation Tax rules - See
BIM66000 onwards.
