United Kingdom: Appeal of Agassi on the basis of territoriality argument denied
Mr Andr? Agassi is an international tennis player ordinarily resident and domiciled outside the United Kingdom. During the relevant tax years he was a resident of the United States. He had set up a company, Agassi Enterprises Inc. controlled by himself and through the Company he entered into endorsement contracts with two manufactures of sports clothing and equipment, Nike Inc and Head Sports AG neither of which is resident or has a tax presence in the UK. Then he came to the UK for a limited number of days a year in order to play in tournaments such as Wimbledon; and he receives from those manufacturers payments made to the Company which are at least in part derived from playing in those tournaments.
On 15 November 1999 Mr Agassi submitted a UK self-assessment tax return, which showed a loss in the UK of ?63,689 on a gross income of ?54,601. This included endorsement income of ?7,206 from Head and ?35,755 from Nike. The UK Inland Revenue opened an enquiry under section 9A of the Taxes Management Act 1970 ("the TMA") and on 7 April 2000 the Revenue issued a closure notice under section 28A(5) of the TMA based (in part) on income calculations of ?23,750 from Head and ?102,158 from Nike. The closure notice set out a charge of ?27,520.40 and a notice of Revenue Amendment under section 28(4) of the TMA was issued on the 2nd June 2000 in accordance with that figure.
Agassi appealed against a decision of the Special Commissioners of 29 July 2003. By the Decision, the Special Commissioners had dismissed the appeal in principle by Agassi against amendments to assessments for the years 1998/1999.
Mr Agassi appealed against the notice of Revenue Amendment and an appeal proceeded before the Special Commissioners. The Commissioners dismissed the appeal. Mr Agassi now appeals against that dismissal to the High Court.
The main argument used was that the UK 1988 Act should not be construed as biting and imposing any obligation to account for a foreigner making the payment who has no connection with the UK. Case law from inter alia 1901 and 1879 was referred to as to indicate or imply that English legislation is primarily territorial.
The High Court, however, held in its judgment of 17 March 2004 that on many occasions statutes have been held to have extra territorial effect. The Court then looked at the context of the tax liability. This context is to levy tax from non-residents carrying on entertainment and sporting activities in the UK, irrespective of the connection with the person making the payment (with the intention to prevent avoidance and evasion). The High Court also held that the Act operates to create a charge on the person receiving the payment irrespective of the identity of the person making the payment. It is according to the High Court common ground that section 556 subjects non-residents to tax, if the payment is made by an English company or by a foreign company with a tax presence here. The question is then whether liability to tax is intended to be excused if instead they are paid by a foreign company with no tax presence here. According to the High Court it would be absurd to attribute to the legislature the intention that liability could in any and all cases be avoided by the simple expedient of channelling the payment through a foreign company with no tax presence in the UK. If this were the case, the tax would effectively become voluntary.
The appeal was dismissed, even though the High Court remarked that the liabilities on Nike and Head may prove to be unenforceable.
