Niasse
| Jurisdiction | UK Non-devolved |
| Judgment Date | 28 February 2024 |
| Neutral Citation | [2024] UKFTT 179 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2024] UKFTT 179 (TC)
Judge Ashley Greenbank, Mr John Agboola
First-Tier Tribunal (Tax Chamber)
Income tax – Employment income – payments of agency fees made on behalf of professional footballer to agent – whether deductible under ITEPA 2003, s. 336 – No – Whether deductible under ITEPA 2003, s. 352 – No.
Penalties – FA 2009, Sch. 55 – Whether notice to file return given – Yes – Permission for late appeals – Refused – Whether reasonable excuse – No.
In Niasse [2024] TC 09093, the First-tier Tribunal (FTT) denied a deduction for agent’s fees in respect of a professional footballer and upheld penalties charged by HMRC in respect of the late filing of self assessment tax returns.
Baye Niasse is a professional footballer who transferred to Everton Football Club from FC Locomotiv Moscow in February 2016. The transfer was facilitated under a “tripartite contract” between Everton, Mr Niasse and his agent, Ivo Rita. Under that contract, Everton made two payments in (2015–16 and 2017–18 respectively) to Mr Rita in discharge of liabilities which Mr Niasse would otherwise have had to make under a separate representation contract he had with Mr Rita.
HMRC subsequently raised assessments in respect of both tax years charging income tax (amounting to £152,873), along with penalties for the late submission of self assessment tax returns for 2015–16, 2016–17 and 2018–19.
Mr Niasse appealed against the income tax charges on the grounds that the agent’s fees would be eligible for a corresponding deduction under either ITEPA 2003, s. 336 or s. 352. He also argued that there was reasonable excuse for the late tax returns, because he was new to the UK and believed that tax returns were not required as his income was already subject to PAYE. In addition, he had separated from his wife and “may not have seen or received” HMRC communications.
The principal questions to be determined by the Tribunal were:
- Were the agent’s fees incurred wholly, exclusively and necessarily in the performance of the duties of the employment as required by ITEPA 2003, s. 336? If not:
- Was Mr Niasse an entertainer within the meaning of ITEPA 2003, s. 352?
The FTT decided that the agent’s fees had been incurred to facilitate the transfer and to enable the employment to commence, rather than in the performance of Mr Niasse’s duties. Furthermore, although it may be commonplace for professional footballers to be represented by agents, it was not a requirement. In fact, the FA Regulations expressly provide that players may represent themselves. The expense of an agent’s fees therefore did not meet the “necessarily” condition of s. 336.
On the second question, ITEPA 2003, s. 352 provides for a deduction in respect of agent’s fees in the case of an “entertainer”. This is defined in s. 352(4) as “an actor, dancer, musician, singer or theatrical artist”. The issue therefore came down to whether a professional footballer could be considered a “theatrical artist”. Referring to Madeley v R & C Commrs, the FTT decided not. Whilst football is entertaining and is watched by millions, it is of a sporting, rather than theatrical bent. A further point considered was whether the fees had been calculated as a percentage of Mr Niasse’s earnings, as required by s. 352(1). The fees paid by Everton were of a fixed sum, which could (as could any other number) be expressed as a percentage of earnings, but they had not been calculated by reference to those earnings. For either or both of these reasons, no deduction was available under s. 352.
Finally, the FTT considered whether there was “reasonable excuse” for the late submission of self assessment tax returns. It was argued on his behalf that Mr Niasse “may not have seen or received” communications from HMRC but, having no direct evidence from Mr Niasse, the FTT was not satisfied that this could be true. He had been able to pass all relevant communications to his representatives before they submitted the appeals. Although he may have been new to the country, he was supported by professional advisers, such as Mr Rita. He had significant income and yet had failed to obtain relevant advice or file tax returns despite HMRC issuing notices and several reminders.
The appeal was dismissed.
The argument in respect of a deduction under s. 336 in this case threw up a common misunderstanding over the difference between expenses incurred “in” the duties of employment and those which have been incurred “for” those duties. To be eligible for a deduction, expenses must have been incurred whilst actually performing the duties, rather than in order for those duties to commence.
Comment by Martin Jackson, Lead Tax Writer, Croner-i Ltd
Ben Blades, counsel, instructed by Elliotts Shah, chartered accountants, appeared for the appellant
Sebastian Purnell, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
[1] The form of the hearing was V (video) via the Tribunal video hearing system. An in-person hearing was not held because of rail strikes making it difficult for the parties and their representatives to attend.
[2] Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.
[3] This appeal is brought by Mr Baye Oumar Niasse against assessments made by the Commissioners for His Majesty's Customs and Excise (“HMRC”) by way of two closure notices dated 16 February 2021 in the amounts of £76,410 (in respect of the tax year 2015/16), and £76,463.10 (in respect of the tax year 2016/17).
[4] Mr Niasse is a professional football player. At relevant times, he was employed by Everton Football Club (“Everton”). The issues giving rise to the amendments made by the closure notices relate to deductions claimed by Mr Niasse from his employment income from Everton in respect of fees paid to his agent in connection with Mr Niasse's transfer to Everton from FC Locomotiv Moscow on 1 February 2016. Mr Niasse claims that these fees are deductible either under section 336 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) or under section 352 ITEPA.
[5] Mr Niasse also appeals against penalty assessments raised by HMRC in connection with the late filing of his tax returns for each of the tax years 2015/16, 2016/17 and 2017/18 in the total amount of £5,262.
[6] We were provided with an electronic hearing bundle of 514 pages and a joint authorities bundle also in electronic form. We were provided with additional authorities in the course of the hearing.
[7] The hearing bundle contained a witness statement of Mr Arvind Shah, which was filed on behalf of Mr Niasse.
[8] Mr Shah is a chartered accountant with Elliotts Shah, advisers to Mr Niasse. Mr Shah has advised Mr Niasse since February 2019. Mr Shah gave evidence and was cross-examined on his statement.
[9] Mr Shah's witness statement contained statements of opinion on matters of law which are for the Tribunal. It also contained various statements of facts to which Mr Shah would not have been the most obvious witness. For example, the witness statement gave details of Mr Niasse's career, on which this Tribunal may have expected to have heard evidence from Mr Niasse himself.
[10] In examination in chief, Mr Blades sought to introduce evidence in support of an argument that it was necessary in order to obtain employment with a Premier League football club and particularly with Everton, for a player to engage an agent. Once again, with the greatest of respect to Mr Shah, the Tribunal might have expected to hear evidence on this issue from those more closely connected with the industry. In particular, the Tribunal heard no evidence from Mr Rita, any representative of Everton, or indeed Mr Niasse himself. We have taken these factors into account in determining the weight that we should give to Mr Shah's evidence.
[11] Our findings of fact are set out in this section.
[12] Mr Niasse is a professional footballer who has played for several clubs both in the UK and elsewhere. He has also played for the Senegal national team.
[13] In July 2014, Mr Niasse signed a contract to play for FC Lokomotiv Moscow.
[14] On 24 November 2015, Mr Niasse entered into a Standard Representation Contract (the “Representation Contract”) with an agent, Mr Ivo Rita of RX Brothers Limited.
[15] The key provisions of the Representation Contract were as follows.
- Under the Representation Contract, Mr Niasse granted Mr Rita worldwide exclusive authority to represent [Mr Niasse] in all contractual negotiations (clause 1);
- The Representation Contract was expressed to commence on 24 November 2015 and terminate on 23 November 2016 (clause 2).
- ) The consideration payable by Mr Niasse under the Representation Contract was a commission amounting to 10% of the Player's Basic Gross Income as a result of any employment contract negotiated or renegotiated by [Mr Rita] (clause 4).
- Any other arrangements arising out of or in connection with the provision of Mr Rita's services were to be in accordance with the requirements of the FA Regulations on Working with Intermediaries (the FA Regulations) and the FIFA Regulations on Working with Intermediaries (clause 5).
- The Representation Contract was governed by the laws of England and Wales (clause 7).
[16] On 1 February 2016, Mr Niasse joined Everton. Mr Niasse was represented by Mr Rita in relation to the arrangements with Everton. Mr Rita also represented Everton. On 1 February 2016:
- Mr Niasse, Mr Rita and Everton entered into a tripartite representation contract (the Tripartite Contract);
- Mr Niasse entered a Premier League Contract with The Everton Football Club Company...
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