Paul was the sole shareholder of P D C Rights Limited, a company he set up to hold and exploit the right to use his image. It is common for athletes, e-sports stars, influencers and entertainers to use companies to do this and there have been many high profile cases in the press and in the courts around the world, where athletes have not been effective because they have been set up poorly and mismanaged.
As it stands, where companies have been set up correctly:
- The athlete’s image right is transferred to the company legally with appropriate supporting documentation.
- Sponsors or teams can engage with the company directly (rather than with the athlete) for the right to exploit the image owned by the company, and payments for this right to use the image are made to the image rights company that owns the right instead of the athlete directly.
Benefits for the athlete, as a result of this part of their compensation being received in this way, are as follows:
- The company benefits from lower corporation tax rates (25%) compared to income tax (likely 45%).
- No national insurance contributions are due on the payments.
- Expenses wholly and exclusively incurred by the company in exploiting the image are deductible from the amount taxable.
- Athletes can control when and how they take money out so they can invest through the companies and prepare for their life after sport.
In Collingwood’s case the UK tax courts have found that he did not structure and manage his image rights affairs correctly, and the compensation P D C Rights Limited received should in fact be treated as Collingwood’s personal income.
The courts also found that the closure of an earlier enquiry into Collingwood’s affairs without adjustment did not mean HMRC couldn’t now challenge the position on this basis.
As a result, HMRC successfully argued that payments P D C Rights Limited received under sponsorship agreements entered into for wearing branded gear, attending events, and hitting performance milestones, should be taxed as personal income on Collingwood, not income in P D C Rights Limited. The result is nearly £200,000 in additional tax liabilities on Collingwood across four years.
Although Collingwood had signed an agreement assigning his rights to the company when he set the company up, the sponsorship contracts were signed by him personally and not on behalf of P D C Rights Limited. There was no clear evidence that the contracts had been properly structured with P D C Rights Limited as the contracted party rather than Collingwood himself.
HMRC’s position was that since Collingwood was personally receiving and benefitting from the payments, and the agreements had not been signed by a company representative, Collingwood should be taxed personally on the amounts received.
His legal team argued the payments were for the company’s services, and that HMRC had already looked into one of the deals years earlier without making changes so they shouldn’t be allowed to revisit it. The tribunal disagreed. They found that Collingwood hadn’t properly, legally assigned the contracts to his company, and there was no solid promise from HMRC that they wouldn’t challenge things later. Both of his appeals were dismissed.
Where image rights agreements are being entered into, tax and legal advice should be sought by athletes to ensure they are fully aware of the tax position and the risks of HMRC challenge in the future. Legal contracts when initially assigning rights to any company are critical and the day-to-day management of the company needs to be kept separate from the athlete’s personal affairs.
At Kilsby Williams, we have vast experience in this area, from an athlete and contracting party perspective, and we have vast experience in the wider sports sector. We also have a number of sports sector specialist legal contacts. If our team can assist, speak to Rob Meredith on 01633 653198.
It should be noted that in the Budget on 26 November 2025, the Chancellor announced that the UK Government will legislate to charge income tax plus employer and employee NICs on image rights payments related to an employment from 6 April 2027. We await further information on this and can advise as these changes progress.
