UK: Agassi – Serving An Ace

Last Updated: 19 December 2006

Roderick Cordara QC and Jern-Fei Ng, Essex Court Chambers, and Martin O’Neill, Vantis plc, acted successfully for the taxpayer in resisting the application of Agassi to VAT Tribunal proceedings

It is not very often that the worlds of tax and sport coincide. However, when it happened recently, an important Court of Appeal authority concerning the recovery of costs paid to non-solicitor representatives was generated. This article seeks to examine the extent to which this judgment applies to proceedings before the VAT Tribunals and how one taxpayer served an unreturnable ball to HMRC on the issue of costs in the VAT Tribunal.


A dispute had arisen between HMRC and the well-known professional tennis player, Andre Agassi, as to whether Mr Agassi could be assessed to income tax in respect of payments connected with his activities in the United Kingdom as a sportsman. This spawned a long-running piece of litigation which, at one stage, culminated in Mr Agassi succeeding before the Court of Appeal. This, in turn, gave rise to an application by Mr Agassi for the costs he had incurred up until that point.

Mr Agassi had chosen to instruct chartered tax advisers, rather than solicitors, to represent him in his court battle with HMRC. HMRC objected to the recovery of any fees which had been paid by Mr Agassi to his tax advisers and this eventually led to a hearing before the Court of Appeal in which the Bar Council and the Law Society were given permission to intervene. The Court of Appeal hearing this issue was reconstituted from the one which had decided Mr Agassi’s substantive appeal as ‘it was recognised that the issues were of considerable importance to the conduct of civil litigation and to the legal profession’ – see Agassi v Robinson (Inspector of Taxes) (Bar Council and another intervening) [2006] STC 580 at para 2.

The decision of the Court of Appeal

The Court of Appeal (per Dyson LJ, who delivered the judgment of the Court) held that the fees paid to Mr Agassi’s tax advisers could not be recovered, on the ground that the tax advisers did not have a ‘right to conduct litigation’ within the meaning of the Courts and Legal Services Act 1990 (‘CLSA 1990’), s 28.

Notwithstanding that the substantive matter has since been resolved by the House of Lords in favour of HMRC (see [2006] STC 1056), the judgment of Dyson LJ on the issue of costs is undisturbed and remains good law for direct tax cases. For the avoidance of confusion, all references to Agassi in this article are, unless stated to the contrary, references to the decision of Dyson LJ on the issue of costs in a direct tax context.

Attempts by HMRC to rely upon Agassi in VAT Tribunal proceedings

There have yet to be any judicial pronouncements as to the extent to which the decision in Agassi would apply to proceedings before the VAT Tribunals and HMRC have to date made no public statements on this question.

It is not uncommon to find taxpayers being represented by tax advisers or accountants in proceedings before the VAT Tribunals. Indeed, the original ethos of the Tribunal system was designed to open the doors to representation in any responsible form and not confined to just lawyers. It would not be difficult to see a strong financial motivation for HMRC’s wanting to argue that the ambit of the judgment in Agassi is wide enough to extend to VAT Tribunal proceedings, so that on occasions where they lose an appeal, the taxpayer cannot get his costs unless he has engaged lawyers.

This was, in fact, the stance which HMRC had adopted in respect of their recent dealings with a taxpayer, Olympia Technology Ltd, for whom we had acted. HMRC had written to the taxpayer, wrongly refusing to allow recovery of input tax, as a consequence of which the taxpayer made all preparations for a full hearing before the VAT Tribunal in what was likely to be a detailed and complex case. HMRC withdrew from proceedings less than a week before the date of the hearing and agreed to pay the taxpayer’s costs. The taxpayer had engaged the services of tax advisers, Vantis plc, to act on its behalf.

Shortly after the taxpayer submitted its claim for costs, HMRC withdrew its offer to reimburse the taxpayer for the sums it had paid to its tax advisers by purporting to rely upon the decision in Agassi.

This resulted in protracted correspondence between those acting for the taxpayer and the HMRC costs draftsman, during the course of which HMRC accepted that the Agassi decision had been incorrectly applied to VAT Tribunal proceedings.

The right to conduct litigation in VAT Tribunals

The reason why Agassi does not apply to VAT Tribunal proceedings is as follows.

The Court of Appeal in Agassi had framed the litmus test as to whether a taxpayer is being ‘represented’ at a hearing (that is, not acting as a litigant in person) as whether the person acting for the taxpayer has a ‘right to conduct litigation’ within the meaning of the CLSA 1990, s 28.

The CLSA 1990, s 28(1) provides that ‘[t]he question as to whether a person has a right to conduct litigation, or any category of litigation, shall be determined solely in accordance with the provisions of this Part’:

CLSA, s 119(1) defines the ‘right to conduct litigation’ as the right ‘(a) to issue proceedings before any court; and (b) to perform any ancillary functions in relation to proceedings (such as entering appearances to actions)’.

The word ‘court’ is defined in s 119(1) to include ‘any tribunal which the Council on Tribunals is under a duty to keep under review’, a definition which encompasses VAT Tribunals.

Section 28(2) goes on to specify that:

‘A person shall have a right to conduct litigation in relation to any proceedings only in the following cases:

(a) where … he has a right to conduct litigation in relation to those proceedings granted by the appropriate authorised body…;

(b) where paragraph (a) does not apply but he has a right to conduct litigation in relation to those proceedings granted by or under any enactment’.

Halsbury’s Laws of England (4th edn reissue), Vol 44(1), paras 1204, 1232 and 1500 makes it clear that ‘enactment’ is capable of referring to delegated legislation, of which the VAT Tribunals Rules 1986 (SI 1986 No590) (‘VATTR 1986’) is one.

The VATTR 1986, Rule 25 stipulates that ‘[a]t the hearing of any appeal or application … any party to the appeal or application (other than the Commissioners) may conduct his case himself or may be represented by any person whom he may appoint for the purpose’ (emphasis added).

It therefore follows that any person appointed by a taxpayer to do so (including tax advisers and accountants) has ‘a right to conduct litigation’ in VAT Tribunal proceedings by virtue of the fact that he has been expressly conferred such a right by an enactment (that is, Rule 25) pursuant to the CLSA 1990, s 28(2)(b).

Further or alternatively, such a person has a ‘right to conduct litigation’ as a result of s 28(2)(c) – ‘where [s28(2)(a)] does not apply but he has a right to conduct litigation granted by that court in relation to those proceedings’. Such a right has, in our view, been granted to non-solicitor representatives by VAT Tribunals as a result of Rule 25.

Moreover, any such representative has a ‘right to conduct litigation’ pursuant to s 28(4) – ‘Where, immediately before the commencement of this section, no restriction was placed on the persons entitled to exercise any right to conduct litigation in relation to a particular court, or in relation to particular proceedings, nothing in this section shall be taken to place any such restriction on any person’. No restrictions were imposed as a result of Rule 25.

It therefore follows that taxpayers have a right to recover the payments they have made to non-solicitor representatives pursuant to Rule 29 – ‘[a] tribunal may direct that a party or applicant shall pay to the other party to the appeal or application … within such period as it may specify such sum as it may determine on account of the costs of such other party of and incidental to and consequent upon the appeal or application’.

This analysis is consistent with the decision of the Tribunal in Taylor (t/a Jeans) (MAN/75/8) at p.4:

[I]t seems to us that the combined effect of Rules 25 and 30 [of the VAT Tribunals Rules 1972 as amended by the VAT Tribunals (Amendment) Rules 1974 (the predecessors to the VATTR 1986, rr 25 and 29 respectively)] is to bring a wider class of persons than solicitors within the ambit of taxing provisions of the High Court. To hold otherwise would be to fetter the free choice of an Appellant in his selection of a representative which, in our judgment, would be contrary to the spirit and intendment of Rule 25. It would, in our view, be contrary to natural justice and to the construction of Rules 25 and 30 to hold that a party is entitled to recover the taxed costs of his solicitor for conducting an appeal on his behalf whereas he is precluded from recovering the taxed costs of his accountant for performing precisely the same task, and possibly with more expertise so far as figures are concerned.

The Solicitors Act 1974

As a final twist in the story, HMRC had, in its correspondence with those acting for Olympia, also sought to rely upon the Solicitors Act 1974 (SA 1974), ss 20(1) and 25 in denying the recoverability of the costs which had been paid to Vantis plc.

Section 20(1), in essence, prohibits an ‘unqualified person’ from acting as a solicitor. An ‘unqualified person’ is a person who has not been admitted as a solicitor and does not have in force a practising certificate – see the SA 1974, ss 1 and 87.

Section 25(1) goes on to provide that "[n]o costs in respect of anything done by any unqualified person acting as a solicitor shall be recoverable by him, or by any other person, in any action, suit or matter’.

Notwithstanding this, CLSA 1990, s 28(6) specifically excludes the application of the SA 1974, ss 20, 22 and 25 ‘in relation to any act done in the exercise of a right to conduct litigation’. As has already been discussed, any person who is so appointed has a ‘right to conduct litigation’ in the VAT Tribunals by virtue of VATTR 1986, rule 25.


As a result of the written representations which had been made to HMRC, its objections in principle to the recovery of the taxpayer’s costs were eventually dropped, without a hearing. This was a sensible course of action for HMRC to adopt and will hopefully resolve any lingering doubts as to the recoverability of sums paid by to non-solicitor representatives in proceedings before the VAT Tribunals. No doubt a public statement to this effect by HMRC will soon be published.

This article was first published in the Tax Journal published by LexisNexis Butterworths, 23 October 2006

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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