Net defeat in the Lords

Andre Agassi didn’t want a fight, but he and several others eventually
decided enough was enough. With the able support of Tenon Media, he decided to
fight back. They enlisted help from Patrick Way of Grays Inn Tax Chambers who
argued that, far from taxing too high a percentage, under the Oceanic Principle,
none of the overseas endorsement income was taxable.

This argument did not succeed at the special commissioners, or the High
Court, but won unanimous approval at the Court of Appeal. Not surprisingly, the
Treasury appealed because, had the decision stood, retrospective claims could
have been made totaling some £500m. Sadly, at the House of Lords the decision
went the other way with a notable dissenting judgment of Lord Walker of

The story is well worth a read. Robert Walker was an eminent tax silk and in
his dissenting judgment he took care to review both the law and the principles
of Clark v Oceanic Containers Inc. He concluded that the overseas endorsement
income was not taxable and that parliament when enacting the legislation did not
have the intention that it should be.

The majority judgment, outlined in the views of Lord Scott and Lord Mance,
makes virtually no reference to Oceanic. Instead, it concentrates on an argument
that it must have been parliament’s intention for such payments to be taxed,
because otherwise tax could be avoided.

Norman Lamont took a contrary view at the time he introduced the legislation.
In addition, Andre Agassi decided not to have the payments made from Head and
Nike to his company in Las Vegas as a form of tax planning, but because there
was no need to bring the funds into the UK.

The Agassi case may be an anomaly that will disappear into the long grass and
be forgotten. The other possibility is that their lordships have introduced a
new form of legal construction, whereby they can decide a legal principle on the
basis of what they consider some 20 years after the event must have been
parliament’s intention at the time.

My fear is that this particular case has thrown up additional uncertainty
where an analysis of the legislation and decided cases may not be sufficient to
determine how a transaction will be taxed and despite the Pepper & Hart
judgment, a review of Hansard may not help either. We have enough uncertainty in
tax already. But let’s not be poor losers. Mike Warburton is senior tax partner
in Grant Thornton UK LLP

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