Sir Chris Hoy has slammed a 'misleading' report in the Guardian newspaper that stated that his company paid him £325,000 in loans as part of a possible tax avoidance scheme.
The article alleged that in a year when Hoy's company dividends were slashed, an open-ended loan for almost the same amount lost was paid to him by the company.
In a statement released today, Hoy said: "Although I would not normally speak about such matters in public, I regard the article to be misleading and as such I have felt compelled to respond.
"In 2010 I took a loan from my company, this was repaid in full in October 2011, a fact which The Guardian was not aware of. This is standard practice in most small companies in the country. Loan monies, as The Guardian points out, are liable for tax at a 25% rate. The dividends that I took to repay the loan were in fact taxed at the highest rate. Neither I nor my company disguise remuneration.
The article implies that my dividend reduction from one year to another is in some way relevant to the loan. This is wholly incorrect. I saw an opportunity to buy property and with the guidance of my advisers I borrowed money from my company to do so. The loan was subsequently repaid shortly thereafter (October 2011) by declaration of fully taxable dividends.
The original report, published on Friday, read:
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.
The Guardian added that Trackstars is believed to be Hoy's image rights company, which receives his sponsorship monies in return for him promoting his sponsors' brands (Adidas, Jaguar, Gilette, Bank of Scotland and Lloyds TSB) and allowing his image to be used in their advertisements.
Hoy added: "Everything I have done is as a UK resident, and is UK taxable and not offshore. Also, to be clear, my lottery funding, which I am very grateful for, stopped in October 2008, though I do still promote the national lottery as I benefit from its support of British Cycling's world class programme.
"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 at my best in London."
HMRC introduced new rules on loans last year to stop "disguised remuneration" in the form of loans. 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."
Last week the comedian Jimmy Carr apologised for a 'terrible error of judgment' after his use of a completely legal tax-avoidance scheme was exposed by The Times.
More than 1,000 people, including Carr, are thought to be using the Jersey-based K2 scheme, which is said to be sheltering £168m a year from the Treasury. The user will hand over their company, receiving only a small salary with negligible tax, then receiving the rest in the form of a 'loan' that will never be repaid.
<p>After an unpromising start, having to be bribed by her parents to learn to ride without stabilisers, Sarah became rather keener on cycling in her university years, and was eventually persuaded to upgrade to proper road cycling by the prospect of a shiny red Italian bike, which she promptly destroyed by trapping a pair of knickers in the rear derailleur. Sarah writes about about cycling every weekend on road.cc.</p>