Major sports events threatened by plan to tax foreign players

A furious inter-Governmental dispute has broken out between the Treasury and the Department of Culture, Media and Sport (DCMS) following a change in the interpretation of tax laws which could threaten a number of major sports events.

As part of a general crackdown on foreign earners, which includes the recent action on taxing non-doms, the Treasury has decided to tax foreign sportsmen and women on money earned in this country at UK rates. While some will be able to claim the tax back from their home country, individuals and companies without such a reciprocal arrangement will be double-taxed.

The change came to light when Uefa, the governing body of European football, revealed it had awarded the final of the 2010 Champions League, the sport's premier club competition, to Madrid rather than the new Wembley stadium because of the change. "The reason is the taxes," said Michel Platini, president of Uefa, after awarding the final to Real Madrid's Santiago Bernabeu Stadium. "The concerns we had over players being taxed were minimised by the English FA but not confirmed by the British Government."

M. Platini also said that Hamburg would stage the 2010 Uefa Cup final ahead of Arsenal's Emirates Stadium.

As well as the Champions League final the ruling could affect England's bid to host football's 2018 World Cup finals, the staging of the British Formula 1 grand prix, athletics events and international cricket tournaments. It could also result in individual players boycotting events in other sports.

The Football Association is astonished and DCMS infuriated. Prevailing Government policy has been to attract major sporting events. "The Treasury are playing silly buggers," said one Whitehall source. "They haven't changed the rules, they've just changed their view and decided to go after foreign players for tax. They are being quite aggressive about it."

Andy Burnham, the Culture Secretary, and ministers, have been applying pressure on the Treasury to relent. Other sporting bodies are likely to join in but the Treasury is said to be "digging their heels in".

A Treasury spokesman last night said: "We don't understand why Uefa are concerned. There has been no change in the rules." He added that the Treasury was hoping further talks with Uefa would resolve the issue.

It is believed in senior football circles that should the issue escalate to the extent that it might affect England's World Cup bid that Gordon Brown would step in and slap down the Treasury. Certainly, the financial spin-offs of staging such an event would dwarf any tax take from its participants. Uefa maintains that footballers should be taxed in their country of domicile and that taxing them separately in every country they play matches in would be both unfair and unnecessarily complicated.

Such taxation is not, however, unknown. Indian cricketers were taxed on their prize money, but not their match fees, in Australia last year. This was, after some negotiation, accepted as India does the same. Athletes were also taxed on their prize money in Germany at the 2006 World Cup meet in Stuttgart.

In respect of football events M. Platini said the German government had given the required assurances. Uefa did recognise Wembley's "outstanding" bid, and offered hope by deferring the decision on the 2011 final, which was expected yesterday. However, this year's Uefa Cup final will continue to be held in Manchester.

Uefa said in a statement: "The home stadiums of Real Madrid and Hamburg were chosen on the basis of capacity, facilities, accommodation and security, among other considerations."

Uefa had been set to announce the venue for the 2011 final yesterday but delayed the decision in a move that William Gaillaird, an advisor to M. Platini, said would give Wembley a chance to provide assurances over the tax issues. "It gives them the chance to provide the necessary answers to the tax question. Clearly Wembley is an outstanding venue," he said. The London stadium, which last hosted the final in 1992, remains on the shortlist for the 2011 final.

Selection of the Bernabeu, which has a 71,569 all-seater capacity, comes four months after Uefa awarded it "Elite Stadium" status, a condition for hosting the finals. The stadium has hosted the final in 1957, 1969 and 1980 and their selection.

This year's Champions League final will take place at the Luzhniki Stadium in Moscow.