Sporting testimonials now the subject of new legislation

Testimonial matches are a long standing practice in the sporting world to honour and pay tribute to a sportsperson’s playing career. These events are often held to signify the end of a sportsperson’s playing career, but can also be to acknowledge a particular period of service.

The practice was introduced at a time when professional players were relatively poorly paid and had limited earning potential following retirement from their sport. Over the years, the concept has evolved from a time when the amount a sportsperson received from the event reflected little more than passing a bucket around spectators attending the match, to thousands of pounds being generated from a special event or a series of related events.

Current legislation allows sportspersons to keep the entire proceeds of any such event without having the obligation to pay tax on it, in some circumstances. However, all of this is about to change.

From 6 April 2017, all income from sporting testimonials and benefit matches for employed sportspersons will be liable to income tax, with an exemption of up to £50,000 available for employed sportspersons with income from testimonials that are ‘not contractual or customary’. This new legislation will apply where the sporting testimonial is granted on or after 25 November 2015, and only to events that take place after 5 April 2017.

Manchester United Football Club recently announced that they are planning a testimonial for club captain, Wayne Rooney, during the summer of 2016. Whilst Mr Rooney has already revealed his intention to donate every penny raised to four charities close to his heart, this event would not be subject to the new legislation in light of the time-frame above.

With many current sportspersons adopting the same approach as Mr Rooney, in donating all proceeds to charitable causes, it will be interesting to see just how much of an impact this new legislation has on Testimonials come April 2017.