Tennis Star Loses House Of Lords Tax Battle

by Amanda Banks, Tax-News.com, London

22 May 2006

The UK's highest court (the House of Lords) has ruled against tennis star Andre Agassi in a closely-watched case involving taxation of endorsement earnings by non-resident entertainers.

The ruling, which is final, imposes tax on a portion of foreign endorsement earnings relating to performance of the endorsement contract in the UK, in Agassi's case, for instance, at Wimbledon, even though the money doesn't touch the UK.

Agassi had challenged an assessment of $50,000 for the 1998-99 tax year in respect of a portion of the star's Nike and Head endorsement earnings; Agassi had appeared at a number of tournaments in the UK. The Court of Appeal had previously ruled in Agassi's favour because neither he nor the sponsors were UK-based.

Had HMRC lost, it might have faced repayment claims totalling GBP500m from numerous other entertainers and performers who have been taxed on similar deals since the current system began to operate in 1988. Section 555(2) of the 1988 Finance Act requires promoters and sponsors to deduct tax before paying stars for work in Britain.

Lord Scott said: "Payments to foreign companies controlled by (the performers) are to be treated as payments to them."

Julian Hedley, Head of Tax at accounting firm Tenon, commented: “This is also only part of a wider ongoing dispute which affects non-resident entertainers regarding the value of their image rights and how endorsement income is assessed to tax in the UK. This has still to be resolved and promises to be another hard fought contest.

“Tenon’s biggest concern about today's decision is that with the exception of Lord Walker, who was the only Law Lord with a tax background and who sought to evaluate the point at issue by reference to statute and case law, none of the other Lords made any such reference to existing statute or case law."

Recommended