On 13 July, Usain Bolt was scheduled to appear at Crystal Palace. The Diamond League meeting was to include a star-studded 100m sprint, with Bolt the main attraction. He withdrew.

The reason he withdrew? Our tax laws meant that he would have to pay more tax than he earned. A combination of the 50% tax rate and changes to the way overseas sports stars are taxed on UK earnings meant that it was simply not viable for him to run. And Bolt said so.

When asked the reason why he was withdrawing, Bolt’s confirmed that his agent had told him he was not to run because he would earn less than he was taxed.

Why would Bolt pay more tax than he earned?

An announcement earlier in the year from HMRC was thought at the time to be potentially devastating to national institutions such as the British Grand Prix, Wimbledon and even the football World Cup bid for 2018.

The change was subtle, but far-reaching. The way tax is claimed from sports stars was to be calculated on worldwide earnings from appearance fees, winnings and global endorsement income based on the number of sporting events in the year. Previously this calculation was made on a daily basis. The effect could be catastrophic.

Effectively, this means the sportsperson would be taxed on the number of tournaments or events held in the UK out of the total number worldwide.

It has already affected a number of sporting events, with the Usain Bolt no-show being the most high profile so far. It will not stop there though.

In golf, the European Tour has stated that overseas players are failing to play in the UK in large numbers as a result of our tax laws, and even the Ryder Cup could be hit.

Although US players do not get paid for taking part, they could still pay 50% tax as the tax includes endorsements and sponsorship. Effectively they will pay tax for taking part for nothing. It can be argued that sponsorship comes partly from being part of the Ryder Cup in the first place, but the deals come from a global profile. If Tiger Woods did not appear in the Ryder Cup, he would still be sponsored.

Government intervention

Sports minister Hugh Robertson, spoke about the Usain Bolt situation on BBC Radio.

He said: "I've not had a direct approach from either the sport's governing body or the promoters of the Crystal Palace meeting so I don't know exactly what we are dealing with here. It is a problem we have come across and addressed with other sports and clearly if they write to me I will take it up with the Treasury. It's a problem across other sports.

"Golfers and tennis players have come to me, and I'm pretty sure that at the back end of the 2012 Olympic bill is a commitment not to tax overseas stars who come over to compete in the Olympics. If there is a particular problem [with Bolt] I'm happy to look at it and see if I can help."

Despite acknowledging the problem, this falls far short of saying anything will be done in the near future. Individual events – such as the 2011 Wembley Champions League final – may well be given special treatment, but that is like bandaging a broken ankle. Proper and full treatment is needed.

Will stars stop shining in the UK? 

Back in January when the announcement was made, it was not clear if would trigger the starting pistol of a mad-dash for tournaments to relocate, with stars simply not coming to UK tournaments. The signs were there though. Now it seems that the warnings should have been heeded.

Whatever the rights and wrongs of sports stars' earnings, their job is sport and it is grossly inequitable to tax them in a way that does not treat them exactly the same way as anyone else doing their job.

Usain Bolt didn’t run at Crystal Palace because our tax laws would mean he earned less than he paid. And why should he? We cannot expect sportsmen and women to subsidise our events. That’s simply unfair.

Hugh Robertson has the chance to resolve the problem, but is unlikely to take any firm action in the near future. The economic situation precludes urgent action. This is a shame. Should overseas stars begin to stay away in more numbers it has the potential to damage not only our enjoyment now but our reputation as a country where sports are an integral part of our culture.

By Julian Shaw, TWD Accountants. July 16, 2010.

What other sports could be affected?

Grand Prix
A Grand Prix driver has 19 races in a season, one here. He would be taxed on 1/19 of his earnings from the entire world. Not only that, it would not be a tax on his endorsement income, image rights and performance bonus in the UK event.

So, if a Brazilian racing driver who has a much higher profile in South America than here took part, came last and was never seen on television here, he would still be taxed the same. Hardly fair.

Boxing
For other sports it could be particularly unfair. A boxer could train for most of the year in a Florida gym, building himself up to a big bout in Las Vegas.

He may win, with a follow-up arranged for summer at Wembley, spending 10 days here. He may lose and not fight again for the rest of the year. If this was the case, he would be taxed on half his income. Talk about taking a beating.

World Cup
Our world cup bid for 2018 could be affected.
Michel Platini has already confirmed that the 2010 Champions League final was awarded to Real Madrid's Bernebeu stadium because Wembley could not offer any guarantees that players would not be taxed injudiciously.

The 2011 Champions’ League final is to be held at Wembley. An exemption clause has been put in place to ensure footballers are not caught by the tax rules.

Tennis
Take the example of pre-Wimbledon tennis. A quarter-finalist at the Aegon Championship (formerly the Artois tournament) at Queens won £15,330 last year. If that player takes part in just two UK tournaments this year it will double his UK tax bill.