Britain raises £68m in tax from foreign sporting stars

But ruling on sponsorship deals could threaten UK's ability to host major tournaments

A tax on foreign stars that helped to net the Government £68m threatens the future of sporting events worth hundreds of millions to the UK economy, it was claimed yesterday. The levy, which allows the Treasury to take a proportion of endorsement deals signed by sports and entertainment stars when they appear at UK events, could also lead to top players boycotting tournaments and Britain losing prime sporting events.

The former Wimbledon champion Rafael Nadal has pulled out of the Queen's Club tournament next year over the issue. Athletics' biggest star, the Olympic champion and 100m world record holder Usain Bolt, has also declined to appear at UK events to avoid being affected.

The ATP World Tour, the governing body of men's tennis, and the Lawn Tennis Association have lobbied the Government for a tax exemption, insisting a player boycott could threaten tennis events such as Queen's and the World ATP Tour Finals, both in London. Golf and athletics tournaments and even horseracing meetings could be affected.

The Foreign Entertainers Unit of Her Majesty's Revenue & Customs (HMRC) collected £68m from the tax in 2009-2010, according to data compiled by Bloomberg News. HMRC calculates the tax by comparing UK appearances with total appearances.

Freddie Huxtable, the head of the sports and entertainment division at the accountants RSM Tenon, which represents footballers and athletes, said the tax affects those earning more than £150,000. If a professional runner competed in two events per year, the London marathon and a race in Germany, he would be taxed on half his global endorsement income, said Mr Huxtable. He said that while there was little public sympathy for multimillionaire sportsmen trying to reduce the tax they pay, the row could dissuade the world's best performers from coming to the UK.

"Maria Sharapova is a classic case. She is very marketable and could, or potentially is, earning a lot more from endorsements than in prize money from tournaments," Mr Huxtable said. "Annika Sorenstam [the Swedish golfer] is another who has an interesting profile. Entertainment and sport is an international business and other countries are not taxing endorsement income. Why do we need to be so aggressive?

"The value of these tournaments significantly outweighs the tax collected. You only have to look at ticket sales to see that. The Government has a job to do collecting tax but it is missing the bigger picture."

A Treasury spokesman said the tax was "fair". "Tax is charged at normal rates and any allowances and other deductions due are deducted before these rates apply."