Bolt has refused to race in grand prix meetings in Britain since 2009 because of the country's draconian tax rules which mean that visiting overseas athletes have to pay tax on their earnings when they compete but also on part of their global income, including sponsorship deals.

The exemption has been granted by Osborne for the London Anniversary Games, which will comprise of the British Athletics London Grand Prix on July 26 and 27 - a Diamond League meet - followed by a one-day Paralympics Grand Prix on July 28.

The exemption will apply to all three days of competition, with a similar provision also in place for the Glasgow 2014 Commonwealth Games, where it is also hoped Bolt will compete.

A similar exemption was in place during London 2012. 

"This tax exemption will encourage more world-class international athletes to compete in the event, and has been granted on an exceptional basis because of the unique opportunity this event provides to build on the legacy of the 2012 Game," said a statement from the Treasury.

"Non-UK resident competitors at the London Anniversary Games, to be held at the Olympic Stadium 26 to 28 July 2013, will be exempt from UK income tax on all appearance fees, prize money, and endorsement income related to their performance at the event.

"The exemption will apply to all non-UK resident accredited competitors in the event.

"It will not apply to any officials, sponsors, coaching staff or UK resident athletes who will continue to be liable to UK tax on any income which is related to their participation in the event.

"The exemption will not cover any other taxes such as corporation tax or VAT.

"The Government will introduce legislation in this year's Finance Bill to enact this exemption."

Like most countries, the United Kingdom demands a share of any appearance or prize money earned by overseas stars when they compete on British soil.

But unlike most countries, the UK also wants a cut of any endorsement income earned by those visitors during their stay.

The new ruling prevents this happening at the London Anniversary Games and Glasgow 2014 and Sports Minister Hugh Robertson has welcomed the move.

"We want to attract the very best athletes," he said.

"This helps us do that."

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