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City lawyer claims tax system for foreign sports stars "absurd"

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The attitude of HM Revenue & Customs (HMRC) to the taxation of foreign endorsement income earned by non-resident sportsmen and women is "absurd", according to leading London tax lawyer Hartley Foster.

In a letter to the , Foster, head of tax disputes at law firm Olswang, commented on Usain Bolt's recent refusal to compete at the athletics event.

In Foster's view, Bolt would have actually had to pay more in tax by competing in London than he would have earned.

Apparently HMRC has changed the way it calculates the proportion of foreign endorsement income that is treated as connected to performance in the UK, and thereby subject to UK tax.

The effect of the rule is that a non-UK resident athlete who, say, enters two marathons (e.g., London and New York) in one year will find that half of his or her foreign endorsement income will be subject to UK tax. "This is even though he or she will probably train almost every day of the year, and may be resident in the UK for the marathon only, and perhaps a few days either side."

Foster criticises this approach, which has led to the UK government giving a number of tax exemptions, for example, to the 2012 Olympic Games and the 2011 Champions League final:

"When concessions are handed out on an ad-hoc basis to mitigate the unfairness of the overall system, judicial challenge to the system often follows close behind.

"Alternatively, the government could reform the system to ensure fairness."

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