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United Kingdom: Appeals Court holds in favour of Agassi

A while ago the High Court ruled in Andr? Agassi v. S. Robinson (HM Inspector of Taxes) that payments which the US resident company of Agassi received from a contract for Agassi?s endorsement of sportswear (relating to Nike Inc. and HEAD Sports AG) were subject to UK tax in as far as they related to Agassi playing in the United Kingdom. The Appeals Court has on 19 November 2004 ([2004] EWCA Civ 1518) overturned the decision of the High Court. The main reason for the Court?s decision appears to have been that neither of the involved firms had a taxable presence in the United Kingdom. The Court held that in the absence of an express provision to the contrary the relevant statutory provision (Sec. 555(2) of the Income and Corporation Taxes Act 1988) must be construed in accordance with the territoriality principle. The provision could therefore not be applied to a foreign person without a taxable presence in the UK. In its reasoning the Appeals Court referred to "Oceanic", a case in which a Judge regarded the difficulty of enforcing a liability against an employer outside the United Kingdom as a very strong reason why the legislation should not be construed as excluding the territoriality principle. It has been reported that the appeals court decision could lead to an obligation for the Inland Revenue to refund close to 500 million GBP to foreign sports figures and entertainers. It has also been reported that the Inland Revenue has been denied permission to appeal to the House of Lords, and that the Inland Revenue have indicated to apply directly to the Law Lords to challenge the decision. The future developments in the United Kingdom will no doubt be followed with great interest by the foreign sportsmen and entertainers concerned, especially those from countries where individual taxpayers are entitled to an exemption for foreign income and those who are in an ?excess credit? position (i.e. not being able to deduct all foreign taxes from the taxes due in their country of residence).

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