Chris Hoy received loan from his own firm

Olympic gold-winning cyclist received £325,000 in arrangement but agent rejects claims of ‘disguised remuneration’

As the comedian Jimmy Carr apologised for a “terrible error of judgment” over his use of a tax avoidance scheme last week, many of his fellow celebrities would have been asking their spin doctors if they should do likewise.

Carr’s now infamous tactic of using a company to pay himself via loans – rather than through salary or dividends – has long been viewed as a cunning but completely legal tax wheeze.

Several top sports stars such as England footballers Wayne Rooney, Gareth Barry and Daniel Sturridge have reportedly employed similar techniques.

But if some might expect such behaviour from a footballer, or even a comedian, then what about an Olympic hero whose sporting development is at least partly the result of lottery funding?

It has now emerged that Sir Chris Hoy, Britain’s multiple Olympic gold medal winning cyclist, has also received a loan from his own company.

The latest accounts of Hoy’s Trackstars Ltd state: “At 30 June 2011 Sir Chris Hoy owed the company £324,771 (2010, £898 – owed from the company). This amount was unsecured and interest free with no fixed repayment terms. During the year dividends totalling £130,000 (2010, £440,000) were paid to Sir Chris Hoy.”

To put that in English, 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.

Having seen Hoy’s disclosure, one tax expert who asked not to be named, said: “It is likely that such arrangements could come under attack under the ‘disguised remuneration’ rules recently introduced by the Treasury.”

In a statement, Hoy’s agent, Rob Woodhouse, said: “Trackstars Ltd is a UK registered taxpaying company established for legitimate commercial purposes. Neither [Hoy] nor the company participates in any ‘disguised remuneration’ scheme.

“[He] has not received any lottery funding since October 2008. He has continued his promotional obligations as a member of the governing bodies’ lottery funded world class programmes.”

Woodhouse declined to explain why Hoy had taken out the loan in the same year as his dividend was slashed by an almost identical figure.

He also would not say if Hoy had repaid any of the loan, or if the Olympian had made a tax saving. Hoy’s accountants, Edinburgh-based Jeffrey Crawford & Co, did not return phone calls.

Directors’ loans started to become known as a tax avoidance tactic after a number of Premier League footballers used such schemes.

Typically, they involved two contracts between player and club – one as a footballer, where they earn a salary and pay income tax, and one for their “image rights”.

The fee for image rights is paid to their company, and then the footballer can take out a loan against that fee until the loan is repaid. If the loan is never repaid, almost no tax is due.

Trackstars is believed to be Hoy’s image rights company – receiving his sponsorship fees in return for him promoting his sponsors’ brands and allowing his image to be used in their advertisements.

Profits at the company have surged over the past two years, on the back of sponsorship deals with the likes of Bank of Scotland and Lloyds TSB – divisions of the partly taxpayer-owned Lloyds Banking Group – as well as sportswear group Adidas, carmaker Jaguar and shaving brand Gillette.

If the notion of the plucky Olympic amateur ever really existed, it seems to be an age away now: sports agents admit that the stellar growth in sponsorship fees owes much to London hosting the 2012 Games, which received more than £2bn of lottery funds and almost £1bn from the Greater London Authority. Between 2009 and 2011, Trackstars increased post tax profits from £63,404 to £406,693.

It is not clear from the company’s accounts how much Hoy could have saved in tax, although a salary of £325,000 would have been liable for tax of about £147,000. But the calculations are likely to have been more complex than that.

Richard Godmon, of accountants Menzies – which specialises in owner-managed businesses – said: “Directors’ loans can be a tax-efficient way of accessing funds over the short term.”

However, he added that if you borrow from your company you are taxed as if it were an employee benefit.

HMRC assumes you would have paid 4% interest on the loan if you had borrowed it on the open market, so a 50% taxpayer has to pay a 2% tax charge every year.

The company making the loan must also pay 25% of the loan amount to HMRC, which is reimbursed when the loan is repaid by the individual. Directors could still technically avoid repaying loans – and therefore tax – by dissolving their company, as once it is struck off from Companies House all balances due to the company cease to exist.

However, HMRC can strike off applications if it feels there is still tax to be paid.

Last year HMRC introduced new “disguised remuneration” rules. It said: “The objective of this legislation is to prevent the avoidance or deferral of income tax and NICs [national insurance contributions] on employment income.

“It will impact on employers and intermediaries who use trusts or loans to reward employees with a view to avoiding or deferring paying tax and NICs.”


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