How Did it All Go So Horribly Wrong?

Tax and cricket: Paul Collingwood v HMRC (2025) 

They say never meet your heroes! Paul Collingwood was one of mine, a classy all rounder, a part of the 2005 Ashes winning side led by Vaughan with Flintoff, and the winning captain of the 2010 T20 World Cup amongst other achievements.  We were at Lords in the Long Room (where else) and we exchanged a few words.  As you can tell, he made a favourable impression.

Run out 

So it is disappointing to see he has been run out, in his case before the First Tier Tax Tribunal. Collingwood claimed to have assigned his image rights to a company he owned, presumably to benefit from the lower rate of tax of corporation tax as opposed to the combined rate of income tax and national insurance on self-employment.

In fact, there is a little bit more to this story than the difference between marginal tax rates, as Collingwood had drawn out all the money in his company, leaving it with no cash but an overdrawn director’s loan account.  He put the company into a Members Voluntary Liquidation where his overdrawn director’s loan account was distributed in specie, a tactic designed to attract the then 10% capital gains tax rate. The combined corporation tax and capital gains tax would have been less than the combined income tax and national insurance. So Collingwood would have been up on the deal.

Stumped 

However, even before we get to the decision of the First Tier Tax Tribunal, Collingwood was stumped by his company being struck off for the late filing of documents. In my experience, it takes some going to allow a company to be struck off, but it does happen. And when it does, you can have the company restored to the Register of Companies by making an administrative restorative application, which is exactly what Collingwood did. This was hardly surprising given the value of the company represented by his overdrawn director’s loan account was approaching £0.5 million. Worse still, if struck off, the overdrawn director’s loan account would have been treated as written off by HMRC, triggering a charge to income tax at the dividend rate which was then about four times the capital gains tax rate.

A batting collapse?

You could say that this sorry mess was a bit like an England batting collapse, only for the lower order to score some valuable runs to save the day. With the company restored, Collingwood must have thought he had made his ground. But the long memories of HMRC recalled investigating Collingwood several years previously on exactly the point they were now taking, even though in a previous tax year they had conceded the technical point in Collingwood’s favour.

In this innings, Collingwood claimed that he had assigned his intellectual property rights, which included sponsorship income, to his limited company. HMRC believed that Collingwood was the person legally entitled to the payments, and as such, they should have been assessed on him as self-employment profits. Collingwood relied on his assignment agreement from 2005, the year of his Ashes victory.  HMRC adduced evidence that the agreements were between Collingwood and the sponsors. The umpires found there was no evidence to support that Collingwood had no legal right to benefit from the sponsorship agreements as the contracts were with Collingwood as an individual and, therefore, he was liable to tax and not his company.

Not quite out 

The tax bill was just short of £200,000, there will certainly be interest as the tax years involved were 2011/12 to 2015/16 other than for 2014/15. Whilst the interest rate of HMRC will have been relatively low towards the start of this period, more recently it has risen and now stands at 8% per annum. In total, the interest is probably around £100,000 unless Collingwood has made payments on account. If Collingwood has acted on professional advice competently given, the chances are there will be no penalties. So at least on one point of potential claim, he has potentially been given not out.

Still £300,000 is no small change at the end of your playing career when your earnings typically reduce with less sponsorship and appearance fees. The after-dinner circuit may hold some respite, if you have a good patter on your hind feet. Otherwise, it will be mean pickings in retirement, Laurence Dallaglio of England Rugby fame being a point in case.

A valuable lesson for the coach 

So what is the lesson? Probably make sure your tax advisor has all the relevant documents and then don’t cut corners with the scope of your personal tax advice. Sometimes a second opinion can be worth it, especially if on a matter of law where the tax advisor can draft the instructions to a barrister. We have a saying at Ritchie Phillips: put the effort in on the front end so you get a better result on the back end. When HMRC come calling – from a tax advisors point of view - there is nothing more satisfying than getting a closure notice to a tax investigation with no adjustment made by HMRC.

Sadly, that was not the case for Collingwood, but at least he remains on the staff of the England Cricket Team as a limited overs specialist and a fielding coach.  He will have greater cheer encouraging his charges down under in the 2025/26 Ashes Series between England and Australia.

If you’d like to discuss any of the above, please get in touch.