Following tax investigations into Premier League football teams and their players England cricket stars are reportedly next on the taxman’s sporting hit list, whilst Olympic cyclist Sir Chris Hoy defends accusations of tax avoidance.
England Cricket team ‘bowled over’ by the taxman
On 30 June The Mail Online reported that the taxman is to launch tax investigations into the alleged use of a tax avoidance loophole by the England cricket team that could save players thousands of pounds tax per year.
England Cricket Team under investigation by the taxmanHMRC are reportedly looking into the use of image rights companies by cricketers. The Mail Online reports that the taxman has met with cricket governing body officials from the England and Wales Cricket Board (EWCB) and approached 18 leading cricket county teams to pursue information on how players are paid.
The taxman is said to be particularly interested in companies set up by cricketing stars to handle earnings from sponsorships and commercial deals; similar to tax investigations into the financial affairs of Premier League footballers announced earlier this year.
HM Revenue and Customs allegedly believe that players are committing tax avoidance by putting a large percentage of their salary into their image rights companies, in order to pay corporation tax at 24 percent rather than the top PAYE rate of 45 percent; if players are earning over £150,000 per year.
Eleven England Cricket team members are expected to be approached during HMRC’s investigations; listed on the Companies House register as owning companies to handle their money. The players in question are Alastair Cook, Andrew Strauss, Eoin Morgan, Graeme Swan, Ian Bell, James Anderson, Kevin Pietersen, Matt Prior, Steven Finn, Stuart Broad and Tim Bresnan.
Spokespeople for the eleven cricket stars have announced that none have yet been approached by HMRC.
Image rights are in place to determine how much financial value the name of a sports star has, off the pitch, and there is no evidence that any cricketer has avoided paying tax. It seems that HMRC are doing their rounds to check each high profile sporting professions’ tax practices.
Sir Chris Hoy denies tax avoidance allegations
Olympic gold medal winning cyclist, Sir Chris Hoy, has been accused of avoiding tax by receiving a loan through his own company – Trackstars Ltd. – rather than through a salary or dividends.
The Guardian reported on the 22 June that:Chris Hoy defends Tax Avoidance allegations
“In 2010 Hoy received £440,000 in dividends which attract taxes not hugely dissimilar from salary. But while he received about £455,000 from the company during 2011, £325,000 came via the open-ended company loan, which attracts minimal tax. It is not clear from the accounts if Hoy’s move, which is legal, resulted in a tax saving.”
Hoy claimed that the story in The Guardian was misleading and that in October 2011 the loan had been repaid in full, which The Guardian did not report:
“Today The Guardian published an article about my financial affairs. Although I would not normally speak about such matters in public, I regard the article to be misleading and as such I felt compelled to respond,” Hoy’s statement reads.
“Everything I have done is as a UK resident, and is UK taxable and not offshore…I am very proudly British and my responsibilities as a British sportsman do not stop once I step off the bike. I take my responsibilities as a taxpayer as seriously as I do as an athlete. I sincerely hope this misleading article does not affect the British support I know I will need to perform my best in London.”
The tax avoidance method allegedly used by Hoy is known as ‘disguised remuneration’: one person pays themselves with a loan, which is not taxed, and then fails to pay it back (which is taxable); Jimmy Carr was recently outed for using a similar tax avoidance arrangement.