A. The first point to mention is that the activities undertaken by the committee if organised on commercial lines amount to trading. Examples of this might include entrance fees to a cricket match or dinner event and any receipts from the sale of any merchandise for the event.
Having stated this, a genuinely voluntary collection for the sportsperson as a measure of person esteem would not constitute a trade receipt.
The committee would be accountable to tax on trade receipts. The net proceeds would then be available for payment to this football player. The net payment would not be a deductible expense for the committee. Where the committee is an unincorporated association it will be within the charge to Corporation Tax.
If the sportsperson has a contractual right, whether written or verbal, to a testimonial then the money raised would be earnings in their hands. It would need to be established that the testimonial was organised to demonstrate affection and regard for personal qualities of the player for the proceeds not to be earnings. Each case would be examined on its own merits with this regard.
From 6 April 2017 where no right or expectation to a testimonial exists a ‘one’off’ once in a lifetime income tax exemption is allowed for the first £100,000 received provided conditions are met.
If you have a tax query, why not contact the Tax Advice Line on 0844 892 2470 to discuss it. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.
