BRITAIN'S sporting calendar is in danger of being decimated by a new threat: a harsh tax regime blowing in from the government.
Some of the world's top sports stars are turning their backs on tournaments in Britain because of "draconian" taxes now being imposed on their worldwide sponsorship deals.
Big events could lose some of their main attractions because of a new offensive by HM Revenue & Customs (HMRC) to impose levies on money from endorsements. It confirmed this weekend that it is also targeting sponsors' performance-related bonuses.
For example, if a sports star plays in two tournaments or races in two marathons a year, and one of those events is in Britain, they could be charged 50% tax on half their total annual sponsorship money.
Sergio Garcia, the Spanish golfer, played five tournaments in Britain in 2001, but plans to play just one here this year. He says that as he is paying more tax than he can earn from winnings, he has to think twice about playing in Britain.
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Julian Hedley of RSM Tenon Media, who represents many top sportsmen, said another leading golfer had paid nearly six times more to HMRC in tax than he earned for participating in two UK tournaments last year - effectively paying a tax rate of 570%.
The taxman is now setting his sights on tennis players such as Roger Federer and Maria Sharapova. When they play at Wimbledon for two weeks this summer, they could be hit by a 50% tax on a proportion of their annual sponsorship deals.
The threat is such that Fifa, football's ruling body, has already asked for an exemption for the 2018 World Cup if it is held in England.
Although teams are generally exempt from the new tax grab on sponsorship money, Wembley was ruled out of holding this year's Champions League final after failing to provide assurances that players taking part would not be taxed on their salaries.
"Yes, the reason was the taxes," said Michel Platini, the Uefa president. Instead the final went to Real Madrid's Bernabeu stadium.
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The size of endorsement taxes can far exceed the appearance fees and winnings that stars earn while competing here. Tax experts said the rules could even land the American golfers playing in the Ryder Cup in Wales this October with hundreds of thousands of pounds in endorsement taxes - even though they will not receive an appearance fee.
Jonathan Orr, the finance director at the European Tour, which organises the Ryder Cup and the British Open golf tournaments, said: "These tax rules are discouraging leading golfers, indeed all leading sportsmen and women from competing in Britain.
"Our aim is to attract the best players to provide the best entertainment for our audiences in the UK, and I strongly believe that this tax rule is seriously hampering these efforts."
The tax rules can be particularly gruelling for marathon runners such as Paula Radcliffe, who typically race just twice a year. An athlete who competed at the London marathon in April and the Berlin marathon in September could have half their endorsement income taxed - even if they spent 50 weeks of the year training in Kenya or Ethiopia.
There are concerns that tennis players will in the future avoid traditional pre-Wimbledon tournaments at Eastbourne, Nottingham and the Queen's Club, in favour of rival championships based in countries that do not tax endorsements of visiting sportsmen.
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Ian Ritchie, chief executive of the All England Club, said: "We urge HMRC to stop this before it is too late. It could inflict huge damage on Britain's ability both to continue to stage world-class sports events and attract new ones in the future."
Nick Bitel, the chief executive of the London Marathon, said: "We now have a situation where a number of senior, well-known sportsmen are saying they will come here only for the biggest events, but not for any other UK events - that's a real loss for British spectators and the economy."
The taxman has begun to pursue a more aggressive line after a 2006 House of Lords ruling involving Andre Agassi, the American tennis player, said endorsement payments should be liable for tax.
Richard Baldwin, a tax consultant who advised the London bid for the 2012 Olympics, described HMRC's approach to sponsorships as "draconian".
"The Revenue has got greedy," said Mike Warburton, senior partner at Grant Thornton, the accountant.
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"In previous years the tax charge would be based on how many days of the year the sportsman was in the UK. So if they played in a two-week tournament, one 26th of their endorsement income would be liable for UK tax.
"Now, HMRC bases it on what proportion of your competition events are in the UK. So, if you only play five tournaments a year and one of them is here, one fifth of your endorsement earnings would be liable for tax."
The HMRC said the tax was always levied on a "just and reasonable" basis.
HOW THEY WILL BE TAXED
Foreign sports stars competing in Britain have to complete a UK tax form declaring their appearance fees, winnings and global endorsement income.
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HM Revenue & Customs imposes an income tax on appearance fees and winnings, plus any endorsement earnings viewed to be "connected to the UK performance".
When determining how much endorsement tax was payable, it used to tax the proportion of a sports star's playing and training days spent in Britain.
The taxman now argues that what counts is the proportion of a sportsman's competition days that are here. So, if half a golfer's tournaments are in Britain, half of his endorsement earnings become liable for British tax.