Since 1996 professional athletes are allowed to compete in the Olympic Games (because – hey – a number of contestants, particularly east of the Iron Curtain, were professionals anyway), and if you are a professional, you are in business. If you are in business, you are liable for VAT, unless an exemption applies.
And, typically, competing in a sport and earning prize money is VAT exempt.
But prize money is only a relatively small element of most professional athletes’ revenue. They are mostly paid for broad marketing and advertising services by big brands. The supply by the athlete of that kind of services is not VAT exempt, and therefore taxable.
So, following the input tax allocation rules in most countries, the VAT that is directly attributable to exempt revenue is not recoverable. VAT directly attributable to taxable supplies is entirely recoverable. And the VAT that is connected to “mixed” activities is creditable on a prorata basis. For example the VAT on the use of a car to travel to sports events, where prize money is collected and marketing services are provided.
Apparently, HMRC is
“increasingly arguing that enjoyment of a sports activity automatically equates to an element of ‘private use or enjoyment’, thereby justifying a restriction on the re-claiming of VAT on costs.”
That is just ridiculous. They say “if you enjoy your work, you can’t claim full VAT credit”. Did you enjoy drafting that VAT advice on your office laptop? Gotcha! No VAT credit on the laptop’s purchase VAT!
See more here: https://www.accountancyage.com/2016/08/09/sports-professionals-in-line-for-vat-clampdown-uhy-hacker-young-claims/