There has been a steady stream of newspaper stories over the last few years covering sports professionals, who have fallen foul of the taxman. In many of these cases, individuals are served with an advance payment notification by HMRC. This means that the individual in question must make a payment, often of a substantial amount, before the final calculations have been done to decide the actual fee due. In other cases, professional sports people have actually been arrested as part of HMRC investigations.
To say that either of these scenarios is an unwelcome surprise would be a huge understatement.
How are you able to mitigate such a scenario happening? Are these stories amplified by the papers or is there a significant risk to you?
As a professional sportsperson, your earnings are likely to be substantially higher than the national average and therefore attract more taxation. There are completely acceptable and professional ways to manage the taxation that you pay. In the very simplest form, this involves things like paying into a pension, which means you benefit from tax relief. This is all part and parcel of good financial planning by preparing for your future, whilst mitigating taxation now.
Any undue attention from HMRC would come, if this mitigation crossed the line into active tax avoidance. Reputable, experienced financial advisers will never advise this sort of measure, which is your first line of defence when it comes to avoiding trouble with the taxman. In a lot of the cases that make headlines, HMRC suspect that individuals have been engaged in aggressive tax avoidance schemes, which attract the previously mentioned consequences. Again, professional, qualified financial advisers will never recommend such schemes.
There are simple worldly rules to bear in mind, to make sure you are not exposed to the risks that such schemes present.
If it is too good to be true, then it probably is. If you work with an adviser currently then you will be aware of the level of growth your investments attract. You should be very wary of anything that promises significantly more above this, particularly over short or guaranteed periods of time.
Always look for clarity. Most legitimate investments are relatively simple. If you or the person offering you the opportunity, cannot see or explain in simple terms what is happening to your money then this is another warning sign. Planning for your future does not need to be complex and if you do not understand what is happening to your money to a reasonably high degree then there will always be a level of risk involved.
Ask your adviser. Not only will reputable advisers never recommend schemes that would fall foul of HMRC, but they will also be able to give you feedback on any schemes or opportunities, which you have been offered and advise of the risk involved accordingly. Always speak to us before making a serious commitment.
The Financial Conduct Authority does not regulate tax advice