Sports professionals could be in line for a targeted tax clampdown with new restrictions being placed on their ability to claim back tax
SPORTS PROFESSIONALS could be in line for a targeted tax clampdown with new restrictions being placed on their ability to claim back tax, on the basis that their work partly constitutes a ‘personal enjoyment’ or ‘a hobby’.
According to UHY Hacker Young, sports professionals who compete for prize money could find their applications to claim back VAT on the related expenditure challenged or rejected.
In most cases, competing in a sport for prize money is free of VAT. However, anyone competing professionally could be incurring expenditure on goods and services- such as training, equipment and publicity- and given that many will have wider business activities such as sponsorship deals, coaching, merchandising, etc, they are likely to be VAT registered and looking to re-claim the tax.
The firm has raised concerns that HMRC is increasingly arguing that enjoyment of a sports activity automatically equates to an element of ‘private use or enjoyment’, thereby justifying a restriction on the re-claiming of VAT on costs.
UHY Hacker Young argues that HMRC’s actions are also at odds with EU VAT law, which would regard the overall operation as an ‘economic activity’ and one carried out ‘in the course of business’.
Simon Newark, Partner at UHY Hacker Young, said: “HMRC’s targeting of the sports sector for supposed ‘non-business’ activity does not in any way stand up to scrutiny.
“A professional sportsperson’s career and ability to generate wider earnings, even often after they formally retire from professional competition, is driven to a large extent by the profile and publicity generated by taking part in big competitions and events- it is quite clearly a business activity and should be treated so for tax purposes.
“Whether or not you happen to enjoy what you do for a living should have absolutely no relevance when it comes to claiming VAT on expenditure.”