Tennis star Andre Agassi recently won a famous victory in the Court of Appeal against UK tax being charged on payments between offshore companies for entertainers’/sportsmens’ activities in the UK. Clara Howard of Osborne Clarke’s tax team reports the new position
The tax treatment of endorsements of entertainers and sportsmen in the UK
Andre Agassi has recently secured a victory in the Court of Appeal in relation to the UK's ability to charge income tax on certain monies received by non-resident entertainers and sportsmen for endorsements made in the UK.Andre Agassi formed a US company, through which he entered into endorsement contracts with Head and Nike, both of whom are based outside the UK. The question was whether the Inland Revenue could collect tax on payments made from one offshore entity to another, neither having a presence in the UK. The Inland Revenue argued that a tax charge did arise on the proportion of the sum paid to Andre Agassi's company for endorsements, where those endorsements were made in the UK.
The Inland Revenue has historically extended legislation designed to collect tax due from promoters to overseas artists to catch offshore to offshore payments, such as those made by Head and Nike to Andre Agassi's company, despite the difficulty in enforcing collection of those taxes.
The Court of Appeal has unanimously decided that such legislation did not extend the Inland Revenue's reach and that offshore to offshore payments were not caught.
The implications of this case are enormous for many sportsmen and entertainers who regularly perform and endorse products in the UK. This ruling is given with retrospective effect, right back until 1986, therefore it has a much more far reaching impact than first thought.
The Inland Revenue has appealed to the House of Lords, watch this space for further updates.