With eSports set to be a billion-pound industry in 2019, and the recent record breaking prize pool of $30m in the Fortnite World Cup, there’s no denying online competitive gaming’s here to stay. The monumental rise hasn’t gone unnoticed however, enter player two – HMRC.
If you’ve watched the news, read any online article or even the odd blog – you’ve heard about the recent Fortnite World Cup. This made the news due to the record breaking prize pool, and because two British teenagers secured prizes totaling over £1m. The event saw forty million players attempt to qualify, out of the 200 million registered players worldwide.
This isn’t just an anomaly, the record for the biggest prize pool’s already set to be broken by another event called ‘The International’, taking place this month. Could this be the start of eSports players achieving the same level, if not, even more wealth and fame than our modern day football players?
How much do eSports players make?
Believe it or not, the prize money isn’t the big money maker for the eSports pros. For example, popular gamer and streamer Tyler Blevins (known online as Ninja) achieves income via the following;
- Live Streaming: Ninja received a cut from Twitch (streaming platform, owned by Amazon) of each paid subscriber he has, gifts from his subscribers, and monthly ad revenue. In an average month, this can total around $300,000.
- Sponsorship: Red Bull, Samsung, Uber Eats and Microsoft are all sponsors of the US gamer.
- Regular Salary: Regular salaries range from £750 – £4,000 a month, however, they’re increasingly rapidly. Players are usually self-employed, and receive a share of their teams’ winnings, paid via a holding company.
All in all, top players like Ninja, are earning up to £1.5m a month.
How’s it taxed?
With organisations operating out of London, but having teams in the US, Asia and beyond, the tax issues both on a corporate level and an individual level are incredibly complex. Adding to this, the tournaments are held all around the world, prizes paid out from companies in various countries and then multinational teams splitting their winnings – it’s a minefield.
Failure to pay the correct amount of tax however, can be met with huge fines, penalties and in some countries, potential imprisonment.
The tax treatment of eSports is similar to sports such as cycling, golf and Formula One, where the players who make up a team are treated for tax purposes as self-employed individuals. This differs from the professional footballers who are employees of the club they play for.
The eSports organisation themselves therefore, will have no PAYE filing obligation and they will have no need to pay employer’s national insurance contributions.
Players are to be taxed in their country of residence, however due to the incredible mobility of the industry, this could see a large portion of eSports players removing themselves from the UK’s top rate of income tax at 45%. If they can do their job in Monaco or Dubai, the weather won’t be the only benefit after all.
Can tax advisors help?
In reality, eSports players aren’t going to want to jet off to Monaco in order to reduce their tax bill. All individual circumstances are going to be different, however the facts are as follows;
- The rate of UK corporation tax is at 19% (falling to 17% in 2020).
- Operation through a company could offer other tax benefits, i.e. gifting to a spouse.
- eSports players appear to have a relatively short career, therefore having monies within a company as an investment could be beneficial later down the line.
Naturally, players from outside the UK coming in to compete, will be subject to tax in the UK on income attributable to their “competition” or “performance”. This is a relatively grey area though, and the rules around their sponsorship deals where they may be showcasing clothing and equipment etc, remain unclear. Nonetheless, it usually isn’t completely necessary to travel to compete, so there’s sure to be large debates between tax advisors and HMRC on whether expenses are wholly necessary for the purpose of the individual’s work.
It’s not over yet…
With tournament prize pools set to grow, more teams to emerge and a plethora of games available – eSports isn’t going away any time soon. This being said, neither’s HMRC.
Want to know more? Call us on 0116 276 2761 or email email@example.com