There has been much written about Jordan Henderson in recent weeks. He has expressed a desire to leave his current club in the Saudi Pro League and return to playing in Europe. As the Liverpool captain to lift both the Champions League and Premier League trophies, obviously, the footballing side to the story is more likely to take the headlines. However, even as a footballer, nobody can escape the UK tax rules!
The example in this article is only to highlight the considerations anyone leaving or returning to the UK should consider. Whilst Jordan Henderson is a high-profile example of this, the facts analysed are only loosely based on his situation and not specifically him (although it might sound a lot like him!) and, if he happens to be reading this, should not be construed as formal advice. As is always the case with UK tax or legal matters, please take advice at the earliest time possible when a move is being considered!
Statutory Residence Test
The UK tax year commences on 6 April each year (the reason for this is very boring but it involves the Pope and the Gregorian calendar) and runs to the following 5 April. Whether someone is tax resident during that year is assessed in accordance with The Statutory Residence Test. For additional articles on this test, please search here.
It is a complex set of rules but essentially it considers both days spent in the UK, and other connecting factors. A complete analysis of the rules is outside the scope of this article but let's assume our protagonist is someone who has played Premier League football for over a decade and has ticked all the boxes to be tax resident in the UK right up until the time they look to move to another club in another country.
Leaving the UK
In the summer of 2023, as they are driving home from the last match of the season, they receive a phone call from their agent to be told they have been offered a lucrative contract to play in an emerging league in Saudi Arabia. Not only will the wages be significant, but they will also be tax-free.
They and their family are so excited, they decide to accept the contract, rent out their house and jump on a plane heading for warmer climes. It is, say, 83 days into the tax year, around half of which he has worked on.
Given they have been UK tax resident in the years prior to them leaving and have been in the UK for those days leading up to the move (having not made it to the European cup final in Istanbul in May), they will be UK tax resident at least up until that point. Fortunately, the UK does allow for a taxpayer to "split" a year into a resident and non-resident portion in some circumstances.
As they have moved to Saudi Arabia for the purposes of taking up a new job, we shall assume that the split year rules might apply in this case for illustrative purposes.
This being the case, they will have suffered UK tax on their earnings in the first part of the tax year, but once they have become non-UK tax resident, their ongoing earnings will no longer be subject to UK taxation. Except there are a couple catches.....
- The Statutory Residence Test
A full analysis of the rules is outside the scope of this article but let's assume with 83 days in the UK during the tax year, they have satisfied the residence rules for the year. It is therefore important that the split year rules will apply.
- Split year
Where one is looking to apply the split year rules, in a year you are looking to leave the UK, you must not only remain non-resident during the tax year in question, but also be non-UK tax resident in the following year. This being the case, if they return to the UK in the January transfer window, the split year rules will not be applicable and their full year's earnings will be taxable to UK income tax.
Conclusion
If our unidentified footballer is keen on playing European football to get back into his national team, they should not return to the Premier League and instead consider taking the contract on offer from another European club. A word of caution though, don't forget to take tax advice in the other country too.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
