Why personal service companies must handle contracts correctly
An important reminder for those using personal service companies: income can only be treated as company income if contracts are signed in the company’s name. A recent tribunal case involving England cricketer Paul Collingwood highlights what happens when contracts are signed personally instead of by the company.
The Collingwood case: what went wrong
HMRC challenged nearly £200,000 of tax relating to sponsorship income. The player’s company reported the earnings, but the contracts were signed in his own name. The tribunal ruled that because the contracts were personal, the income was his, not the company’s. This shows how personal service companies must ensure they are the legal party to all agreements.
What this means for personal service companies
Even if income is later transferred to the company, tax liability remains with the person named in the contract. For personal service companies, this means:
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Contracts must be in the company’s name
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The company should issue invoices directly
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Payments should go into the company’s bank account
Without these steps, HMRC can easily disregard the structure.
A key reminder for accountants and agents
For those advising clients with personal service companies, reviewing paperwork is essential. Proper documentation can protect individuals from costly tax disputes. If there is any uncertainty, seeking professional tax advice is the safest option.
Final thoughts
This case is a strong reminder that personal service companies must ensure their contracts, invoicing, and banking arrangements are aligned. Getting it right protects both the business and the individual.
Final thoughts
The Collingwood case is a clear reminder that substance must match form. Assigning rights to a company is not enough if the contracts themselves are in the individual’s name.
👉 To avoid costly mistakes, contact Care Accountancy today. Our experts can review your contracts, ensure compliance, and help protect you from unexpected HMRC challenges.
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