What do the Kings of Leon, Jannik Sinner and Scottie Scheffler have in common? If paying taxes in the UK this summer as international performers and athletes was your answer, then you are correct (although probably not too popular at parties)!
Whilst there is no Glastonbury this year, there are plenty of other festivals happening this summer across the UK from BST Hyde Park and Download to TRNSMT and Creamfields. And as always, there are a number of major sports events; Wimbledon, The Open, Women’s T20 World Cup, Commonwealth Games, The Hundred, just to name a few.
So, what does this mean for Rachel Reeves?
How much tax do international performers pay in the UK?
Well, apart from festivals and sporting events contributing a significant boost to the economy through local spending and tourism, the performers are also contributing to the Exchequer’s coffers by way of tax on their fees (as well as on sponsorship income, for certain sportspeople).
How is income tax calculated for non-UK entertainers?
Non-UK entertainers are subject to tax on performances carried out in the UK regardless of whether they are tax resident in the UK. This is administered in two ways; firstly through a 20% withholding tax on their fees, followed by a Self Assessment tax return to calculate the final position.
Alternatively, it is possible to apply for an advance tax application to calculate the correct amount of tax due (taking into account relevant expenses) which is withheld from the performer’s fees, saving the need to file a tax return.
As this is dealt with through HMRC’s specialist Foreign Entertainers Unit (FEU), these withholdings are generally known as FEU tax.
How is tax paid on sponsorships?
It is rare these days for individuals in the public eye not to have some sort of sponsorship or endorsement deal, for example; actors and coffee, sports people and energy drinks or even singers and games consoles.
HMRC are well aware of this. In addition, their view is that the entertainer’s performances and their sponsorship income are inextricably linked, thereby meaning that a just and reasonable proportion of the sponsorship income is therefore taxable in the UK.
How paying tax as a foreign performer works in practice
As an example, let’s take a US golfer who has a number of sponsorships, including one from a sportswear brand for worldwide print and video advertising and another for personal appearances at a US car showroom.
It is easy to understand the logic of this individual coming to the UK to play at The Open and paying UK tax on the prize money received. What is less obvious is the tax position on their sponsorship income.
HMRC’s view is that the value of the entertainer’s image is due to the performances that that individual carries out. Therefore, part of the sponsorship income derives from UK duties and is therefore taxable here.
Now it would be hard for HMRC to argue that personal appearances made overseas would fall within the UK tax net. However, a portion of the worldwide advertising deal for the sportswear brand will.
In addition, some sponsorship deals have cash incentives based on winning or placing in major competitions. Therefore, should the golfer win The Open, they may be entitled to an additional sponsorship bonus, which would be wholly taxable in the UK (on the basis that it is only paid due to duties carried out in the UK).
How we can help
Whilst everyone has an exciting summer ahead, whether you are into sports or music, the tax position of foreign entertainers is a complex area and requires specialist knowledge. If you have any questions about your tax position in the UK as an entertainer or athlete, please contact Adam Jefferies or Stephen Kenny.
Let’s just hope the weather holds out for all you festival-goers!
