The new Foreign Income and Gains (FIG) regime is often presented as a clean break from the UK’s former remittance basis. For many internationally mobile individuals, that is broadly true.
For sportspeople, however, the position is far less forgiving. In practice, athletes are significantly more likely to fall within statutory exclusions that pull income into UK taxation, even where it is paid offshore and even where the underlying activity takes place overseas.
Understanding why this happens and how the revised overseas workday relief (OWDR) interacts with FIG is critical for any sportsperson becoming either UK tax resident, even for a short term.
Where Sportspeople most commonly fall outside FIG
Sportspeople are particularly exposed under the FIG regime because their income is typically linked to:
- UK duties, such as playing, training, and promotional activities
- image rights arrangements; and
- performance related receipts that HMRC will look through to the underlying activity.
As a result, income that is often assumed to be ‘foreign’ is frequently treated as UK taxable and therefore excluded from FIG altogether.
HMRC’s analysis does not turn on where a match is played or where the income is paid. Instead, it focuses on the nature of the duties giving rise to the income. In particular, HMRC defines ‘performance income’ as income arising from a relevant activity carried out by an entertainer or sportsperson, whether that activity is performed in the UK or overseas.
Where performance income arises while the individual is UK tax resident, it is treated as taxable in the UK on the arising basis and falls outside the scope of the FIG regime. This represents a significant departure from the former remittance basis, under which qualifying individuals could often shelter such foreign income from UK tax provided it was not remitted.
The role of Overseas Workday Relief
Although performance income is excluded from FIG relief, sportspeople may still perform overseas duties as part of their employment, for example, overseas fixtures, pre season tours, or training camps.
This is where Overseas Workday Relief (OWDR) connects with FIG. Under the revised rules, OWDR may be available for employment income attributable to duties performed outside the UK during the individual’s first four years of UK tax residence. Unlike under the old regime, there is no longer a requirement for the income to be paid into, or retained in, an overseas bank account.
However, OWDR is now subject to a strict annual cap equal to the lower of:
- 30% of qualifying employment income, or
- £300,000 per tax year.
For high earning athletes, this cap can significantly limit the amount of income that qualifies for relief.
A simple example
A professional footballer becomes UK tax resident and is within their four year FIG window. During the season, they participate both in the UK domestic league and in an international tournament held wholly overseas.
In the same tax year:
- the footballer earns a UK club salary of £5,000,000
- they have 200 club workdays in total
- 40 of those workdays are spent overseas on a pre season tour and non UK international tournaments.
It is tempting to assume that income relating to overseas matches would be sheltered under the FIG regime. However, FIG relief depends on the type of income, not simply where the match is played or where the money is received. For professional sportspeople, performance income is excluded from FIG relief altogether.
That said, the footballer may still claim OWDR in respect of employment income attributable to overseas duties. Using a workday based apportionment as a just and reasonable method, £1,000,000 of the salary is attributable to non UK workdays (40/200).
Under the reformed OWDR rules, relief is capped at the lower of:
- 30% of qualifying employment income (£1,500,000), or
- £300,000 per tax year.
Although £1,000,000 is attributable to overseas duties, only £300,000 is relieved under OWDR. This results in UK taxable employment income of £4,700,000.
By contrast, under the former remittance basis regime, the full £1,000,000 could have been relieved from UK tax (assuming it was not remitted to the UK). The reform therefore brings an additional £700,000 into charge, equating to approximately £329,000 of extra revenue for HMRC at 47% (45% income tax plus 2% NIC).
Why Sportspeople are disproportionately affected
Taken together, these issues explain why sportspeople are far more exposed under the FIG regime than many other internationally mobile individuals.
Their income is typically:
- highly mobile
- fragmented across multiple jurisdictions
- closely linked to physical presence and performance
- frequently structured through companies or hybrid arrangements that attract increased HMRC scrutiny.
While the FIG regime can still be extremely valuable, it is not a substitute for careful pre-arrival planning and should not be relied upon as a catch all solution. Although FIG may appear more generous than the remittance basis at first glance, the practical outcomes for sportspeople can be materially worse if these exclusions and caps are not fully understood.
For further information or to discuss your personal circumstances, please get in touch with us, or your usual Crowe adviser.
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