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The Circuit

Hamilton faces 'battle' with taxman

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  • Hamilton faces UK tax bill on an estimated quarter of his income
  • Drivers testing and competing at the British Grand Prix face tax bills
  • Switzerland and Monaco are the favorite spots for Formula One's stars
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By Glen Scanlon
For CNN
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LONDON, England (CNN) -- Nothing is certain in life bar death and taxes, according to the proverb.

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Lewis Hamilton now calls Switzerland home after moving to an apartment near Geneva late last year.

Formula One's stars regularly cheat death, but escaping the taxman requires a lot more effort.

Lewis Hamilton reignited the tax debate in October after announcing a move to Switzerland -- a tax haven -- to limit intrusions to his private life. He later admitted the implications for his tax bill played a part.

The Briton has rented an apartment near Geneva, and can count a number of current and former drivers among his neighbors including Michael Schumacher, Fernando Alonso, Kimi Raikkonen, Nick Heidfeld, Jean Alesi and Jacques Villeneuve.

Jenson Button, meanwhile, is one of the drivers who prefer Monaco's charms.

HSBC Private Bank's director of sport Mark Pannes said the UK, even when certain measures were taken, still had a heavy tax burden compared to Monaco -- where the top tax rate was zero compared to the UK's 40 percent -- and Switzerland.

Athletes eyeing a move to Switzerland could structure a deal with the authorities before emigrating, significantly limiting their tax liability (often to a single digit percentage). Dubai and Singapore were also tax "neutral."

Pannes said it was about "optimizing" the amount of tax an athlete paid, not avoidance.

"The issue you always balance is you're leaving behind your family, friends and your culture ... the goal is to optimize your tax and pay your fair share."

A number of top sports people remained resident in the UK for family reasons, he said.

Mike Warburton, a senior tax partner with Grant Thornton, said UK residents had to pay tax on their worldwide income.

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"If you are a sporting celebrity and travel the world you don't spend that much time in the UK anyway. You spend three-quarters of your time out of the UK and want to be considered as no longer resident. If you are no longer resident the tax rules become much friendlier."

However, he said for grand prix drivers it was almost impossible to claim they were not performing duties in the UK.

Hamilton and Button would have to prove they had left the UK permanently or indefinitely.

However, if they visited family, had homes and trained in the UK, Revenue and Customs would argue they had not left permanently.

"They [Revenue and Customs] start asking if you have left, where are you resident, Monaco? How much time do you spend there?

"Arguably, grand prix drivers are nomads. The difficulty for people like Hamilton and Button is they don't spend enough time to show they are resident there [Switzerland and Monaco]. Revenue argue you actually haven't left and the drivers argue they have."

Warburton said drivers would be paying some UK tax whatever their residential status because they had testing bases here and drove at the British Grand Prix.

"Hamilton has to be here testing [at McLaren's Woking base] and at Silverstone. Revenue collect tax from that and I suspect there is probably a battle going on between them."

Warburton estimated the UK authorities would look to tax a quarter of Hamilton's income -- he has a driving deal alone worth $140m over five years -- even though he had moved to Geneva.

Pannes said there was not a specific sum that opened the door to people looking to move abroad for tax purposes -- it depended more on an individual's "pain" threshold.

A former UK resident wanting to be considered non-domiciled for tax purposes could not be in the country for more than an average of 90 days annually over four years. This made it difficult for footballers to claim non-domiciled status but made sense for many golfers, tennis players and drivers.

Pannes said a major pitfall for athletes was ensuring their affairs were structured properly from the start of their careers.

"A professional athlete's earning arch is always shorter than they expect. If they amass front-end tax liabilities, because they have such a short window to earn big cash, they end up with less than expected." E-mail to a friend E-mail to a friend

All About Michael SchumacherFernando AlonsoKimi RaikkonenNick HeidfeldJacques VilleneuveJenson ButtonSwitzerlandMonacoDubaiSingapore

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