There has been quite a lot of recent press coverage about HMRC popping up on Luke Littler’s Twitter (or X if you insist) feed to remind him of his tax liabilities. For those of you who are not darts fans Littler was the runner up in the recent World Darts Championship. Apparently, he is only 16, but looks a lot older (although I digress…). The HMRC comment was made in respect of his £200,000 winnings from the event.
Although there will be instances where darts prize money is not subject to income tax (for example money won in a casual game with friends), I think it is clear that Littler, as a professional, will be subject to income tax and national insurance on his trade-related profits. Note here that I said ‘profits’ and not income. As I am sure that the young darts prodigy appreciates, expenses need to be factored in when calculating profits. This led me to consider what kinds of expenses Littler should be able to deduct from his income.
‘Wholly and exclusively’
For Littler to deduct expenses they need to be incurred wholly and exclusively for the purposes of his trade. Usually, expenses which have what is known as ‘a duality of purpose’ will not meet this condition. In a darts context this may be difficult to determine because darts is something you can enjoy both as a hobby and as a profession. For example, would Littler be able to enjoy tax relief in respect of darts coaching trips to tournaments that he has not entered but attended ‘to learn from the greats’? Would he get tax relief for his fancy darts shirt, given that he enjoys wearing it to nightclubs on a Friday night (and despite being 16 he would have no trouble getting in!)?.
In HMRC’s manual BIM 50620 they confirm that athletes are subject to the same ‘wholly and exclusively’ rule as other professions and seek to provide some guidance. Here, they do concede that where expenses have identifiable personal and professional elements to them then full relief can be taken for the professional part. They also hold the view that some expenses will not be deductible as they have an intrinsic duality of purpose. These would include medical expenses, dietary advice and training expenses. HMRC say this because these items of expenditure have personal benefits which are not specific to the darts profession (and if you remember Jocky Wilson he might have argued that a good diet and exercise would have hindered his darts!).
However, HMRC do concede that particular kinds of medical treatment very specific to the sport may be allowable. This stems from the case of a stunt man being able to deduct the expenses of a knee operation. If Littler were to incur expenses to fix a bone in his right wrist, then he would have a good chance of arguing that these are deductible. HMRC also seem to suggest that things like physiotherapy during a particular event may be deductible if particularly linked to that event. Helpfully, they do not seem to distinguish generally between the same person playing ‘hobby darts’ and ‘serious darts’ and therefore any darts coaching should be allowable.
Littler, on balance, should be able to deduct the cost of his fancy darts shirt, although he may want to consider wearing something else for those nights out.
I am not an expert on Littler’s rise to success, but he also wants to be thinking about any pre-trading expenditure that he incurred. For example, perhaps his parents lent him money to get him up and running on the darts circuit. Trips to qualifying events and darts training academies should all be totted up and then these can also potentially be deducted against his trading income.
Forbes Dawson view
Sportsmen and women are subject to the same trading rules as any other trader, although duality of purpose issues are more likely to arise for them. In general, they should be more careful to consider the reasons behind particular items of expenditure and if there is a clear link to their sport they should be documenting this. Using the medical expense example, it would be much easier for Littler to determine how key a particular operation is to his darts at the time of the operation rather than having to pester doctors at the end of January or during a tax enquiry.
Anyway, now Littler is bringing in the cash he needs to turn his eye to less glamorous issue of tax deductibility of expenses. It may be that HMRC’s tax receipts are ultimately less than they anticipated when they made their cheeky tweet.
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