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Sometimes a sportsperson may choose to donate some, or all of the proceeds to which they are entitled from a sporting testimonial held on their behalf, to their chosen charity or a number of charities. When the sportsperson鈥檚 testimonial has been arranged by a third party sporting testimonial committee and that sportsperson鈥檚 testimonial payment incurs an income tax liability under section 226E ITEPA 2003 and a Class 1A NICs liability under section 10ZBA SSCBA 1992, then provided the sporting testimonial committee follow the rules for Payroll Giving, then the income tax and Class 1A liabilities can be reduced by the equivalent amount of the charitable donation.

Example

The proceeds from a sporting testimonial, held for the benefit of a sportsperson by a sporting testimonial committee, result in the committee intending to pay the sportsperson a testimonial payment of 拢300,000. The first 拢100,000 of that payment is below the threshold. Therefore the remaining 拢200,000 would ordinarily be liable to income tax and a Class 1A liability. However, before receiving their 拢300,000 testimonial payment, the sportsperson elects to donate 拢50,000 from that amount to charitable causes. Provided the sporting testimonial committee make those charitable donations via the payroll giving provisions, then the amount of the testimonial payment that is liable to income tax and Class 1A NICs is now reduced to 拢150,000.

拢300,000 minus 拢50,000 charitable donation = 拢250,000.

拢250,000 minus 拢100,000 exemption = 拢150,000.

Amount of testimonial payment liable to income tax and Class 1A NICs = 拢150,000.

Contractual or customary testimonial payments arranged by the employer

A payment made to a sportsperson following a contractual or customary testimonial arranged by the employer is treated differently as far as donating proceeds to charity is concerned.

Provided the employer registers a scheme with payroll giving then the tax liability on the testimonial payment will be reduced by the equivalent amount of the donation but this won鈥檛 apply to the Class 1 NICs liability as payroll giving does not apply to primary Class 1 NICs.

Example

The proceeds from a sporting testimonial, held for the benefit of a sportsperson by her employer, results in proceeds of 拢300,000. As the testimonial was arranged by the sportsperson鈥檚 employer all of the proceeds are subject to tax and Class 1 NICs as earnings

Before receiving the 拢300,000 testimonial payment, the sportsperson elects to donate 拢50,000 from that amount to charitable causes. Provided the employer make those charitable donations via the payroll giving provisions, then the amount of the testimonial payment that is liable to income tax is now reduced to 拢250,000.

Class 1 NICs are still due in full on 拢300,000 as payroll giving does not apply to primary Class 1 NICs.