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Britain's jock tax may haunt them

Britain is apparently the only country in the world that taxes endorsement income of non-residents. So when Tiger Woods plays in The Open Championship, he has to send a check to the British Treasury for income he earns from, say, his Buick endorsements. This borders on extortion, and tournament organizers are paying notice. Here is Kevin Mitchell, writing in The Guardian:

When the Prime Minister addressed a schools sports conference in Telford in February, the 2012 Olympics awarded to London were supposed to be the nation's feel-good centrepiece for nine major international sporting tournaments, starting with the the 2009 World Twenty20 and the 2010 Ryder Cup in south Wales.

Mr Brown had good reason to be cheerful. The next Ryder Cup was in the bag, obviously, as were the London Olympics, the 2014 Commonwealth Games in Glasgow, the 2014 Ryder Cup at Gleneagles, and the 2019 Cricket World Cup. But now, thanks to a fastidious and, no doubt, smug desk Johnny at the Inland Revenue responsible for pointing out the devil in the detail of the Income and Corporation Taxes Act of 1988, four of the events yet to be allocated - the 2013 rugby league World Cup, the 2015 rugby union World Cup, Euro 2016, and the 2018 football World Cup - are all in jeopardy.

And here is why. When Thierry Henry steps on to the Old Trafford turf on Tuesday night for the second leg of Barcelona's Champions League semi-final against Manchester United, it will cost the Barça star more than he bargained for. The Revenue's little squeeze, unearthed by said clever-clogs tax mandarin, means Henry, like all visiting international athletes and entertainers who are handsomely rewarded by major sponsors, will have to declare his endorsements and pay a slice of the income from his high-profile global sponsor, Gillette, to the Revenue. No other country in the world applies such a charge - and that seemingly inconsequential quirk is discouraging international sports governing bodies such as Uefa, Fifa, the International Cricket Council and the International Rugby Board from favourably considering staging their events in this country.

If their admittedly pampered practitioners baulk at coming to the UK because of the tax, their event is diminished. The easy alternative, of course, is to take it somewhere else. And, as we have seen with the Champions League, that is already happening.

When the Treasury were made aware of this issue, through a legal challenge in May 2006 by Andre Agassi, they predictably dug their heels in - despite the American tennis player's reasonable assertion that he did not live in this country and that the payments went not directly to him but to a service company, which is common practice.

Agassi brought the action after receiving a demand for £27,500 on his endorsement earnings in the UK during the 1998-99 tax year. The Law Lords ruled that Nike and Head, his sponsors, benefited from his presence at Wimbledon - and so did he. Which is hard to argue with - if you don't take account of the knock-on effect the ruling has. And that is not the brief of civil servants. These are bottom-line merchants and, in the case of the Revenue, that is only about money.

It was a crucial victory for the keepers of the national purse. Had they lost they faced paying out millions to superstar athletes and entertainers stretching back over 18 years. Indeed, when HM Revenue and Customs won the case, they decided to turn the screw even further.

Initially, they calculated the tax as a percentage of 365 working days in a year. They then concluded that, as nobody works every day of the year, they would reduce that total significantly to take into account holidays and time off for injury - so their cut went up accordingly. What started as an isolated case has mushroomed into a serious problem for sport and the government.

'Two major international sports stars, a golfer and a tennis player, are considering not coming here for some tournaments this summer,' a well placed source tells me. 'They will compete at Wimbledon and The Open, obviously, but bypass smaller events. This has already happened and one big golf event last year attracted a poor field because of this tax.'

Henry shares the Gillette spotlight with two obvious suspects in this regard: Tiger Woods and Roger Federer. There is little chance of Woods not playing in The Open, or Federer boycotting Wimbledon. But, for various reasons, they will not be lighting up our summer anywhere else.

Already, Federer opts out of Queen's in favour of the grass of the Halle tournament in Germany. And Woods plays only in those tournaments where his presence is adequately compensated - adequate being $3million. The richest sportsman in the world earns about £1m a week, whether he is swinging a club or not, so he is unlikely to look favourably on handing over any of that to the British taxman.