Agassi: Game, set and match to the Revenue by Euan Lawson, solicitor

June 2006


André Agassi lost his long-running legal battle with the Revenue yesterday.  By a 4 to 1 majority, the House of Lords overturned the earlier Court of Appeal decision and ruled against Agassi in his contention that he had no personal liability to UK income tax in respect of certain endorsement income relating to appearances at tennis tournaments (including Wimbledon) in the UK. Agassi, who is neither resident nor domiciled in the UK, traded through a personal services company, Agassi Enterprises Inc., a company controlled by himself and incorporated in the USA.  It received endorsement payments from Nike Inc. and Head Sports AG (neither of which had a tax presence in the UK). Agassi had argued that, even though a portion of the endorsement payments could be directly connected with his performance at tennis tournaments in the UK, he had no tax liability because the relevant legislation provided that his liability to tax was contingent on the payers being subject to a UK withholding obligation.  Since the payers had no tax presence in the UK, they could have no withholding obligation because of the so-called “territoriality principle” which states that, unless the contrary is either expressly stated or plainly implied, UK legislation is applicable only to British subjects or to those coming to the UK and making themselves subject to British jurisdiction. The Court of Appeal had found in favour of Agassi.  However, the Lords held that, although the territoriality principle was relevant, it was necessary to ask whether the implied territorial limitation could also sensibly be read as carrying through into the primary tax charge.  The answer to that question was ‘no’.  Put simply, the relevant consideration was the nature and status of the payment rather than the identity of the payer.  The legislation had been introduced not only to provide an improved collection machinery but also to expand the ambit of the basic tax charge on trading income.  Further, it could not have been Parliament’s intention to provide that a tax liability could be avoided simply by ensuring that all payments were made by foreign entities. The decision safeguards potentially millions of pounds of future revenue for the Treasury by making a clear distinction between the charge to tax on the taxpayer and the liability of the third party payer to make and account for deductions at the basic rate.

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