Press Release
The House of Lords' opinion on Agassi tax case does not reflect the intention of Parliament or the legislation
Following the announcement last week by the House of Lords on their decision in the case of HM Revenue and Customs’ appeal to secure tax payments from Andre Agassi on endorsement income paid outside the UK, Andre Agassi's adviser Julian Hedley, Head of Tax, of Tenon said the following:
"We remain of the opinion that the majority decision in the House of Lords is wrong. The starting point is s.556(5) which provides that the section as a whole does not apply unless payments made by Head or Nike fall within s.555(2) (the person making the payment must deduct basic rate income tax and pay it to the Revenue)."
"The requirement to deduct basic rate income tax is, as most practitioners are aware, shorthand for saying that the payer must either be UK resident or otherwise within the charge to UK income tax. The authority for this, which is very plain, is Clark v. Oceanic which was decided by the House of Lords no more than three years before, what are now, ss.555 and 556 were enacted and confirmed the principle of territoriality (the UK Exchequer cannot tax outside the jurisdiction)."
"We have conceded all along that if the legislation did not have the requirement for the payer to deduct tax etc., (i.e. for the payments to be UK source) we would lose but our consistent argument has also been that the legislation is limited to payments made by UK-resident payers, and does not apply to foreign payments."
"Our submissions to the House of Lords were extensive and included reference to a statement from Mr. McGregor, the Chief Secretary to the Treasury and the promoter of the Bill which introduced the legislation, who said to Parliament that the legislation dealt exclusively with “United Kingdom incomes of non-residents”. So it is clear beyond all doubt that Parliament did intend to limit the legislation to UK-source income."
"There is nothing strange about this because, of course, as Lord Walker (who gave a dissenting opinion) observed, the legislation was designed to stop people coming to tournaments such as Wimbledon or concerts in the United Kingdom and leaving the jurisdiction before tax could be collected from them. So it was aimed at capturing tax on UK payments. It was never aimed at payments made entirely outside the United Kingdom."
"We remain of the view that the opinion of the House of Lords:
- does not reflect the intention of Parliament (see what the Minister said)
- ignores the clear wording of the legislation (only UK-source payments).
"So, we are understandably disappointed with the outcome."
Ends.
Notes to Editors
Contact
For further information, contact Jackie McColl on 0141 272 8046/ 07800 617445 or email jackie.mccoll@tenongroup.com
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