Agassi v Robinson (Inspector of Taxes)
| Jurisdiction | UK Non-devolved |
| Judge | LORD HOPE OF CRAIGHEAD,LORD NICHOLLS OF BIRKENHEAD,LORD MANCE,LORD WALKER OF GESTINGTHORPE,LORD SCOTT OF FOSCOTE |
| Judgment Date | 17 May 2006 |
| Neutral Citation | [2006] UKHL 23 |
| Court | House of Lords |
| Date | 17 May 2006 |
[2006] UKHL 23
Appellate Committee
Lord Nicholls of Birkenhead
Lord Hope of Craighead
Lord Scott of Foscote
Lord Walker of Gestingthorpe
Lord Mance
HOUSE OF LORDS
Appellants:
Timothy Brennan QC
Bruce Carr
(Instructed by Her Majesty's Revenue and Customs Solicitors Office)
Respondents:
Patrick Way
Nicola Shaw
(Instructed by Sharpe Pritchard)
My Lords,
I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Scott of Foscote and Lord Mance. For the reasons they give, with which I agree, I would allow this appeal.
My Lords,
I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Scott of Foscote and Lord Mance. I agree with them, and for the reasons they give I would allow the appeal.
Introduction
My Lords,
The Income and Corporation Taxes Act 1988 ("the 1988 Act"), sections 555 to 558, and the Income Tax (Entertainers and Sportsmen) Regulations 1987 (SI 1987/530) (the 1987 Regulations) make provision for the taxation of entertainers and sportsmen who are not resident in the United Kingdom in respect of their profits or gains arising from commercial activity carried out by them within the United Kingdom. The relevant statutory provisions were first enacted in the Finance Act 1986, section 44, and Schedule 11 to that Act under which the 1987 Regulations were made. The 1988 Act is a consolidating Act and the relevant provisions in the 1986 Act and its Schedule 11 became sections 555 to 558 in the 1988 Act. The 1987 Regulations continue to have effect as if made under the 1988 Act (see Interpretation Act 1978 section 17(2)(b)). This tax appeal raises a point of construction of sections 555 and 556 and, in particular, the question whether section 555(2) should be given its literal effect or a limited effect so as to exclude from its scope persons who neither reside or carry on any trade in the United Kingdom. The well-known principle of statutory construction that it should generally be presumed that a statute is not intended to have extra-territorial effect is relied on by the taxpayer, Mr Andre Agassi. The Special Commissioners, however, declined to give section 555(2) the limited effect contended for and, on appeal, Lightman J agreed with them. But the Court of Appeal disagreed and the issue of construction must be resolved by your Lordships.
The facts
The relevant facts are not in dispute and can be shortly stated. The taxpayer, Mr Agassi, is a very well known professional tennis player. He is neither resident nor domiciled in the United Kingdom and never has been. In the tax year relevant to this appeal, 1998/1999, Mr Agassi played in United Kingdom tennis tournaments, including Wimbledon.
Mr Agassi owns and controls a company, Agassi Enterprises Inc. (Agassi Inc.), whose business includes entering into contracts with manufacturers of sports clothing and equipment under which Mr Agassi sponsors or advertises the manufacturers' products in return for payments made to Agassi Inc. Two contracts relevant to this appeal were entered into. One was a contract with Nike Inc. ('Nike') dated 1 January 1995: the other was a contract with Head Sport AG ('Head') dated 1 January 1999. Pursuant to these contracts Agassi Inc. received payments during the 1998/1999 tax year.
Neither Nike nor Head was resident in the United Kingdom in the 1998/1999 tax year, nor did either company carry on any trade in the United Kingdom, whether through a branch or agency or a permanent establishment. Nor were their payments to Agassi Inc. made in the United Kingdom. The payments were, however, payments that had a connection of a "prescribed kind" (see Regulation 3 of the 1987 Regulations) with a "relevant activity" (see Regulation 6) performed by Mr Agassi in the United Kingdom.
Mr Agassi submitted a self-assessment tax return for the 1998/1999 tax year which showed certain receipts from Nike and Head but the Inspector of Taxes issued a closure notice (see section 28A(5) of the Taxes Management Act 1970) based on additional payments said to have been received by Agassi Inc. from Nike and Head. The closure notice gave rise to a notice of amendment of Mr Agassi's self-assessment tax return proposing the addition of an income tax charge of £27,500 odd. Mr Agassi appealed against the notice and the proceedings to which I have already referred followed.
The statutory provisions
In order to understand the submissions about section 555 and 556 that have been made to your Lordships it is necessary to refer to the problems about the tax treatment of foreign entertainers and sportsmen that led to the enactment of the relevant provisions of the Finance Act 1986. There were a number of perceived problems in applying to foreign entertainers and sportsmen the charging provisions of section 108 of the 1970 Act (which became section 18(1)(a)(iii) of the 1988 Act). Section 108 imposed a Schedule D charge to tax on the profits or gains of any person, whether or not resident in the United Kingdom, from any trade, profession or vocation carried on in the United Kingdom.
The first problem related to the concept of carrying on a trade, profession or vocation. Was a person who made only single or infrequent visits to this country, eg, playing in, say, two tennis tournaments, carrying on a trade, profession or vocation in this country? Second, would income arising from commercial endorsements, eg wearing Nike tennis shoes and playing with a Head tennis racquet, be regarded as part of the profits or gains of carrying on the trade, profession or vocation? Third, the section 108 charge only applied to the person carrying on the trade, profession or vocation. Would payments made to a foreign company, albeit controlled by the person exercising the trade, profession or vocation, be caught by the charge? And, fourth, collection of the tax from a foreign entertainer or sportsman, whose visits to this country might be sporadic and who would often have no assets in this country, was not always practicable. This was particularly so because the basis of assessment was the preceding year basis. These were the problems that were addressed in the 1986 Act by provisions that became, on consolidation, sections 555 and 556 of the 1988 Act.
It is convenient at this point to set out in full sections 555 and 556 of the 1988 Act.
"555.?(1) Where a person who is an entertainer or sportsman of a prescribed description performs an activity of a prescribed description in the United Kingdom ('a relevant activity'), this Chapter shall apply if he is not resident in the United Kingdom in the year of assessment in which the relevant activity is performed.
(2) Where a payment is made (to whatever person) and it has a connection of a prescribed kind with the relevant activity, the person by whom it is made shall on making it deduct out of it a sum representing income tax and shall account to the Board for the sum.
(3) Where a transfer it made (to whatever person) and it has a connection of a prescribed kind with the relevant activity, the person by whom it is made shall account to the Board for a sum representing income tax.
(4) The sums mentioned in subsections (2) and (3) above shall be such as are calculated in accordance with prescribed rules but shall in no case exceed the relevant proportion of the payment concerned or of the value of what is transferred, as the case may be; and 'relevant proportion' here means a proportion equal to the basic rate of income tax for the year of assessment in which the payment or, as the case may be, the transfer is made.
(5) In this Chapter?
(a) references to a payment include references to a payment by was of loan of money; and
(b) references to a transfer do not include references to a transfer of money but, subject to that, include references to a temporary transfer (as by way of loan) and to a transfer of a right (whether or not a right to receive money).
(6) This section shall not apply to payments or transfers of such a kind as may be prescribed.
(7) Regulations may?
(a) make provision enabling the Board to serve notices requiring persons who make payments or transfers to which subsection ( 2) or (3) above applies to furnish to the Board particulars of a prescribed kind in respect of payments or transfers;
(b) make provision requiring persons who make payments or transfers to which subsection ( 2) or (3) above applies to make, at prescribed times and for prescribed periods, returns to the Board containing prescribed information about payments or transfers and the income tax for which those persons are accountable in respect of them;
(c) make provision for the collection and recovery of such income tax, provision for assessments and claims to be made in respect of it, and provision for the payment of interest on it;
(d) adapt, or modify the effect of, any enactment relating to income tax for the purpose of making any such provision as is mentioned in paragraphs (a) to (c) above.
(8) Where in accordance with subsections (2) to (7) above a person pays a sum to the Board, they shall treat it as having been paid on account of a liability of another person to income tax or corporation tax; and the liability and the other person shall be such as are found in accordance with prescribed rules.
(9) Where the sum exceeds the liability concerned, the Board shall pay such of the sum as is appropriate to the other person mentioned in subsection (8) above.
(10) Where no liability is found as mentioned in subsection (8) above, the Board shall pay the sum to the person to whom the payment or transfer to which subsection ( 2) or (3) above...
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