Court of Appeal hold no taxation without residence Agassi v Robinson (Inspector of Taxes) (2004)

January 2005

Artists, Sponsorship

The Court of Appeal has held that income tax was not chargeable on a proportion of Andre Aggasi’s sponsorship payments made by a non-resident company to the sportsman’s own company which had no UK tax presence. In overturning the decision of Lightman J the Court of Appeal applied the decision of the House of Lords in Clark v Oceanic Contractors Inc (1983) 2AC 130 that there was a general presumption in UK law that a taxing statute did not have an extra territorial effect.
The Court of Appeal acknowledged that Mr Agassi visited the UK each year to play tennis tournaments and that his company received payments from sponsors which derived in part from his playing at those tournaments. The Court held that whilst at first look two sections of the Income and Corporation Taxes Act 1988 might apply to Mr Agassi in fact neither did. Section 18 which imposed a charge irrespective of the recipients residence but could not apply as the payments were made not to the recipient but his company. Sections 555 and 556 of the Act (when taken together with the Regulation 7(2) of the Income Tax (Entertainers and Sportsmen) Regulations 1987) provided that any activity, however transient, would count as an exercise of trade in the United Kingdom and section 555(2) of the Act provided for a collection mechanism when a company was used. However it was here that section 555(2) could not apply because of the presumption in Oceanic and that the Lightman J had erred when finding that the territoriality principle did not apply.
Lord Justice Buxton said that foreign entertainers and sportsmen with UK activities were charged tax on (i) payments made directly to them even by a person with no connection in the UK and (ii) on payments to associated companies where the payment is made by a person with a UK tax presence. Here Mr Agassi was not be to treated as the person to whom the payments had been made for the purposes of the 1988 Act.
COMMENT : The case is important for entertainers as much as for sportsmen and women but it will be interesting to see if the UK legislature now moves to provide for a taxable charge where associated companies are used by entertainers to receive sponsorship monies outside of the UK from non-UK companies but where some or all of the activities being sponsored take place in the UK.

Sources: The Times Law Report 27 November 2004 and Judgment 19 November 2004.

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