Key Facts
- •Mr. Baye Oumar Niasse, a professional footballer, appealed against HMRC assessments and penalty assessments.
- •The assessments concerned deductions claimed for agency fees paid to his agent, Mr. Ivo Rita, in connection with his transfer to Everton.
- •Mr. Niasse claimed the fees were deductible under sections 336 or 352 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA).
- •The penalties related to late filing of tax returns for 2015/16, 2016/17, and 2017/18.
- •Everton paid Mr. Rita directly on Mr. Niasse's behalf under a tripartite agreement.
- •The tripartite agreement included 'Further Services' aimed at maintaining a stable relationship between Everton and Mr. Niasse beyond the initial contract negotiations.
Legal Principles
For an expense to be deductible under section 336 ITEPA, the employee must be obliged to incur it as a holder of the employment, and it must be wholly, exclusively, and necessarily incurred in performing the duties of the employment.
Income Tax (Earnings and Pensions) Act 2003, section 336
The 'obliged to incur' test under section 336(1)(a) ITEPA focuses on whether the duties of the employment, not the employer's instructions, necessitate the expense.
Case law including Ricketts v Colquhoun, Shortt v McIlgorm, Lomax v Newton, Brown v Bullock, Elwood v Utitz, Fitzpatrick v IRC, Madeley v HMRC, and HMRC v Banerjee.
Expenses incurred to obtain employment, such as agency fees, are not deductible under section 336 ITEPA.
Case law including Shortt v McIlgorm and Madeley v HMRC
Under section 352 ITEPA, a limited deduction for agency fees is allowed for entertainers if the fees are calculated as a percentage of earnings, subject to a 17.5% limit.
Income Tax (Earnings and Pensions) Act 2003, section 352
The definition of 'entertainer' in section 352(4) ITEPA is not broad enough to include professional footballers.
Case law including Madeley v HMRC and interpretation of legislative history
To establish a 'reasonable excuse' for late filing under Schedule 55 FA 2009, the taxpayer must prove objectively reasonable grounds, considering their circumstances.
Finance Act 2009, Schedule 55, paragraph 23; Perrin v HMRC
Outcomes
Appeals against the closure notices (tax years 2015/16 and 2016/17) were dismissed.
Agency fees were not deductible under section 336 ITEPA because Mr. Niasse was not obliged to incur them as part of his employment duties, nor were they wholly, exclusively, and necessarily incurred in performing those duties. He was also not an 'entertainer' under section 352 ITEPA, and the fees weren't calculated as a percentage of his earnings.
Appeal against the penalty assessment (£5,262) was dismissed.
While the Tribunal accepted the issue of whether Mr. Niasse received section 8 TMA notices was before them despite not being explicitly pleaded, the Tribunal found Mr. Niasse did not have a reasonable excuse for the late filing of his tax returns, and permission for late appeals was refused.