A testimonial is a practice in certain sports, particularly football, where an event, usually a match, is held to honour a player for their service to the club. The players usually receive payments from independent committees arising from these events.
At present the tax treatment of such payments is governed by HMRC guidance which broadly states that, where the right to a testimonial match forms part of the sportsperson’s contract of employment, the payment is subject to income tax and NIC. Where there is no such entitlement and no custom exists, the payments are not regarded as earnings but are gifts to demonstrate ‘affection and regard for the personal qualities of the player.’
Further to the Summer Budget and consultation published in 2015, the government has confirmed that all income from sporting testimonials and benefit matches for an employed sportsperson will be chargeable to tax and NICs. This treatment will be subject to a ‘one-off’ exemption of £100,000 of income received from events held during a single testimonial or testimonial year. Where the player has a contractual entitlement or customary right to the sporting testimonial or benefit match then this exemption will not apply.
Independent testimonial committees will now need to operate PAYE where the total proceeds from a non-contractual sporting testimonial or benefit match (or a number of events comprising a testimonial year) for an employed sportsperson exceed £100,000.