Baye Oumar Niasse v The Commissioners for HMRC

The main terms of the Tripartite Contract are set out in the following paragraphs.

The recitals to the Tripartite Contract recorded the following matters:

Under clause 1, Mr Rita was obliged to provide, inter alia, the “Club Services”:

“The Club hereby appoints the intermediary to provide services on the following terms:

(a)

acting in the negotiations with Lokomotiv to procure the transfer of the Player’s registration to [Everton] on a permanent basis on terms acceptable to [Everton];

(b)

advising [Everton] on negotiation strategy with regard to the Contract;

(c)

acting as an intermediary for [Everton] in any communications with [Mr Niasse] regarding the Contract, including the communication of [Everton’s] proposed terms;

(d)

assisting [Everton] in reaching an agreement with [Mr Niasse] to accept [Everton’s] proposed contractual terms instead of pursuing any other options available to him;

(e)

concluding the terms of the Contract so that [Mr Niasse] may be registered with [Everton] under the Contract by the FA and the PL and [Mr Rita] has agreed to so act in this matter…”

Clause 1(f) provided for Mr Rita to provide further services to encourage a stabler relationship between club and Mr Niasse (referred to as the “Further Services”). It was in the following terms:

“The Club also wishes that the Intermediary works to encourage a future stable relationship between the Club and the Player during the term of the Contract for the benefit of the Club and the Player as further set out in clause 13 below (the ‘Further Services’).”

Clause 1 also contained an acknowledgement that Mr Rita was obliged to provide the “Player Services” to Mr Niasse under the Representation Contract:

“It is acknowledged and agreed that the intermediary shall also provide services to the Player under the Player Representation Contract in connection with the negotiation of the Contract with the Club (“the Player Services”).”

Subject to the provisions of the Tripartite Contract that provided for earlier termination in the case of a material breach, the term of the Tripartite Contract was expressed to be:

Clause 4 provided that neither Everton nor Mr Niasse was required to use Mr Rita’s services:

“Neither the Club nor the Player shall be obliged to use the services of the Intermediary during the term of this Representation Contract and the Club may represent itself and/or the Player may represent himself should they so desire.”

Clause 5 provided that if Mr Rita had not provided any of the “Services” (being the Club Services, the Player Services and the Further Services” he would not be entitled to any payment under the contract.

Mr Rita’s remuneration for the Club Services was governed by clause 6. His remuneration in respect of those services was the following three sums:

“(a)

£141,500…within 14 days of the Player being registered with the Club under the Contract by the FA and the [Premier League];

(b)

£141,500…on 7 February 2017; and

(c)

£142,000…on 31 December 2018.”

Clause 7 provided for the remuneration clause in the Representation Contract not to apply and for the consideration due to Mr Rita for the provision of the Player Services to be a series of payments set out in clause 7:

“The Player and the Intermediary hereby agree that the existing remuneration clause in the Player Representation Contract shall not apply and in consideration for the provision of the Player Services by the Intermediary to the Player, the Intermediary shall be paid, in accordance with the requirements of the [FA Regulations] and the terms of this [Tripartite] Contract (including but without limitation clause 8 below) the following sums:

(a)

£141,500…within 14 days of the Player being registered with the Club under the [Premier League Contract] by the FA and the [Premier League];

(b)

£141,500…on 7 February 2017; and

(c)

£142,000…on 31 December 2018...”

Also under clause 7, Mr Niasse authorized Everton to pay these sums (together with any VAT) to Mr Rita on his behalf. It was agreed that Mr Niasse was to account to HMRC for any income taxes or social contributions due in respect of the sums payable.

The payments due to Mr Rita under clauses 6 and 7 were conditional upon Mr Niasse remaining registered to play for Everton on the relevant date for payment (clause 8).

Under the terms of clause 12 of the Tripartite Contract, Mr Rita undertook and warranted to both Everton and Mr Niasse that he would perform the “Services” “in good faith and in the best interests of” Everton and Mr Niasse. The clause then set out a series of particular obligations and warranties of Mr Rita regarding the performance of the services under the contract (such as, complying with the rules and regulations of the FA).

Clause 13 dealt with the Further Services. It was in the following form:

“In consideration of the mutual promises contained herein the Intermediary shall also have ongoing obligations to assist the Club in the performance of the Further Services, which shall include, without limitation:

(a)

he will not, and shall procure that no Company officer shall, induce the Player (or any other player at the Club) to terminate unilaterally any registration or contract (including the Contract) he has with the Club or to otherwise act in breach of it or act in any manner which is inconsistent with the Player's duties and obligations thereunder;

(b)

he will not, and shall procure that no Company officer will, without the prior written consent of the Club make any public and/or private statements that the Player is interested in terminating his relationship with the Club;

(c)

he will not, and shall procure that no Company officer will, interfere with or damage the relationship between the Player and the Club or the Player and any officer or employee of the Club or lessen in any way the Player's contentment with the Club;

(d)

he shall use his best endeavours to ensure that the Player attends Club official engagements and works with the Club's sponsors so as to promote and strengthen the Club's relationship with such persons;

(e)

he shall use his best endeavours to ensure that the Player understands his position as a representative of the Club in the public eye and acts accordingly in a proper manner and in the best interests of the Club at all times; and

(f)

he shall advise the Club (in the case of any Company officer via the Intermediary) on the welfare of the Player and on any difficulties perceived by the Intermediary, a Company officer, the Player or the Club in achieving the objectives set out in this clause.”

The Tripartite Contract was governed by the laws of England and Wales.

The main terms of the Premier League Contract are set out in the following paragraphs.

Under clause 2, Everton engaged Mr Niasse as a professional footballer for the duration of the contract subject to any early termination. The termination date of the contract was 30 June 2020 (Schedule 2, paragraph 2)

Everton agreed to pay Mr Niasse remuneration in accordance with Schedule 2 of the contract (clause 5).

The remuneration specified by Schedule 2 comprised the following:

Mr Niasse’s obligations under the Premier League Contract were set out in clause 3:

“3.1

The Player agrees:

3.1.1

when directed by an authorised official of the Club:

3.1.1.1 to attend matches in which the Club is engaged;

3.1.1.2 to participate in any matches in which he is selected to play for the Club; and

3.1.1.3 to attend at any reasonable place for the purposes of and to participate in training and match preparation;

3.1.2

to play to the best of his skill and ability at all times;

3.1.3

except to the extent prevented by injury or illness to maintain a high standard of physical fitness at all times and not to indulge in any activity sport or practice which might endanger such fitness or inhibit his mental or physical ability to play practise or train;

3.1.4

to undertake such other duties and to participate in such other activities as are consistent with the performance of his duties under clauses 3.1.1 to 3.1.3 and as are reasonably required of the Player;

3.1.5

that he has given all necessary authorities for the release to the Club of his medical records and will continue to make the same available as requested by the Club from time to time during the continuance of his contract;

3.1.6

to comply with and act in accordance with all lawful instructions of any authorised official of the Club;

3.1.7

to play football solely for the Club or as authorised by the Club or as required by the Rules;

3.1.8

to observe the Laws of the Game when playing football;

3.1.9

to observe the Rules but in the case of the Club Rules to the extent only that they do not conflict with or seek to vary the express terms of this contract;

3.1.10

to submit promptly to such medical and dental examinations as the Club may reasonably require and to undergo at no expense to himself such treatment as may be prescribed by the medical or dental advisers of the Club or the Club’s insurers;

3.1.11

on the termination of this contract for any cause to return to the Club in a reasonable and proper condition any property (including any car) which has been provided or made available by the Club to the Player in connection with his employment.

3.2

The Player agrees that he shall not:

3.2.1

undertake or be involved in any activity or practice which will knowingly cause to be void or voidable or which will invoke any exclusion of the Player’s cover pursuant to any policy or insurance maintained for the benefit of the Club on the life of the Player or covering his physical well-being (including injury and incapacity and treatment thereof);

3.2.2

when playing or training wear anything (including jewellery) which could be dangerous to him or any other person;

3.2.3

except to the extent specifically agreed in writing between the Club and the Player prior to the signing of this contract use as his regular place of residence any place which the Club reasonably deems unsuitable for the performance by the Player of his duties other than temporarily pending relocation;

3.2.4

undertake or be engaged in any other employment or be engaged or involved in any trade business or occupation or participate professionally in any other sporting or athletic activity without the prior written consent of the Club PROVIDED THAT this shall not:

3.2.4.1 prevent the Player from making any Investment in any business so long as it does not conflict or interfere with his obligations hereunder; or

3.2.4.2 limit the Player’s rights under clauses 4 and 6.1.8;

3.2.5

knowingly or recklessly do write or say anything or omit to do anything which is likely to bring the Club or the game of football into disrepute cause the Player or the Club to be in breach of the Rules or cause damage to the Club or its officers or employees or any match official.

Whenever circumstances permit the Player shall give to the Club reasonable notice of his intention to make any contributions to the public media in order to allow representations to be made to him on behalf of the Club if it so desires;

3.2.6

except in the case of emergency arrange or undergo any medical treatment without first giving the Club proper details of the proposed treatment and physician/surgeon and requesting the Club’s consent which the Club will not unreasonably withhold having due regard to the provisions of the Code of Practice.”

The Premier League Contract was expressed to be governed by English law.

It is HMRC’s case that a notice under section 8 of the Taxes Management Act 1970 (“TMA”) requiring Mr Niasse to submit a tax return for the tax year 2015/16 was issued to Mr Niasse on 12 August 2016. This is disputed by Mr Niasse, and we address the evidence on this point later in this decision notice.

On 24 March 2017, HMRC issued a penalty of £100 to Mr Niasse for the late filing of his tax return for the tax year 2015/16.

It is HMRC’s case that a notice under section 8 TMA requiring Mr Niasse to submit a tax return for the tax year 2016/17 was issued to Mr Niasse on 6 April 2017. This is also disputed by Mr Niasse, and we address the evidence on this point later in this decision notice.

On 3 August 2017, HMRC wrote to the Mr Niasse notifying him that his tax return for the tax year 2015/16 was outstanding and asking him to submit a completed return.

On 17 September 2017, HMRC issued a penalty of £300 to Mr Niasse for the late filing of his tax return for the tax year 2015/16 and a further penalty of £900 for the late filing of his tax return for the tax year 2015/16.

On 22 March 2018, HMRC issued a penalty of £100 to Mr Niasse for the late filing of his tax return for the tax year 2016/17.

On 29 March 2018, HMRC issued a further penalty of £300 to Mr Niasse for the late filing of his tax return for the tax year 2015/16.

On 19 July 2018, HMRC sent a letter to Mr Niasse in relation to his failure to file his return for the tax year 2016/17, notifying him that his tax return was outstanding and asking him to submit a completed return.

It is HMRC’s case that a notice under section 8 TMA requiring Mr Niasse to submit a tax return for the tax year 2017/18 was issued to Mr Niasse on 6 April 2018. Once again, this is disputed by Mr Niasse and we address the evidence on this point later in this decision notice.

On 16 September 2018, HMRC issued a penalty of £300 to Mr Niasse for the late filing of his tax return for the tax year 2016/17 and a further penalty of £900 also for late filing of his tax return for the tax year 2016/17.

On 16 October 2018, HMRC wrote to Mr Niasse to inform him that he still had not filed his overdue tax returns for the tax years 2015/16 and 2016/17 and that penalties (with interest) in the sum of £1,607.46 were due on account of the late filing of tax returns.

On 7 February 2019, Elliotts Shah wrote to HMRC to notify HMRC of their authorization to act for Mr Niasse. They also responded to HMRC’s letter of 16 October 2018. On behalf of Mr Niasse, Elliotts Shah appealed against the late filing penalties on the grounds that: (i) Mr Niasse was new to the country and was unaware of the obligation to file a tax return, and (ii) he had not received notice to file a tax return.

HMRC responded on 22 March 2019 in two separate letters – one in relation to the tax year 2015/16 and one in relation to the tax year 2016/17 – explaining that they could not consider the appeals against the penalties until tax returns for the relevant tax years had been filed. Both letters stated:

On 26 March 2019 HMRC notified Elliotts Shah that Mr Niasse’s return for the tax year 2017/18 had not been filed in time and that an initial penalty of £100 would be charged. Also on that date, HMRC issued a further penalty of £300 to Mr Niasse for the late filing of his tax return for the tax year 2016/17.

On 18 April 2019, Elliotts Shah wrote to HMRC enclosing paper copies of Mr Niasse’s tax returns for the tax years 2015/16 and 2016/17.

In that letter, Elliotts Shah reiterated the appeal against the penalties at the same time. They stated the grounds of appeal as being (i) that no notice to file a tax return was issued; (ii) the self-assessment tax record for Mr Niasse was not set up until March 2019; and (iii) Mr Niasse was of the “sincere view” that he was not required to file a tax return as he had no other income and his earnings were being taxed at source under PAYE. They also informed HMRC that they had filed Mr Niasse’s return for the tax year 2017/18 on-line and appealed against the initial penalty for late filing of that return issued on 26 March 2019.

HMRC accept that the letter of 18 April 2019 enclosing the returns for the tax years 2015/16 and 2016/17 was received by HMRC on 23 April 2019. They also accept that the return for the tax year 2017/18 was filed on-line on 18 April 2019.

HMRC gave notice of intention to enquire into the tax returns for the tax year 2015/16 and the tax year 2016/17 on 12 November 2019.

By way of closure notices dated 16 February 2021, HMRC made amendments to the returns and raised assessments on Mr Niasse in the sum of £76,410 (in respect of the tax year 2015/16) and £76,463.10 (in respect of the tax year 2016/17). A closure notice was also issued in respect of the tax year 2017/18, but it is not in issue in this case.

On 16 February 2021, HMRC issued a notice of penalty assessment in respect of the tax year 2016/17 in the amount of £1,962.

Following the issue of the closure notices and the penalty assessment, Mr Niasse gave notice of his intention to appeal against the closure notices and the penalty assessment on 10 March 2021. In relation to the appeal against the penalties, the letter referred to their letters of 7 February and 18 April 2019.

Mr Niasse appealed against HMRC’s decision to the Tribunal on 9 April 2021. The notice of appeal included an appeal against penalties in the amount of £1962, being the penalties charged in relation to the late submission of the tax return for the tax year 2016/17 but not against the penalties for the other tax years. The grounds of appeal did not include any grounds that are relevant to the appeal against the penalties.

In a series of emails between HMRC and Elliotts Shah between 19 April 2021 and 25 June 2021: Elliotts Shah made some small corrections to the grounds of appeal stated in the notice of appeal; HMRC noted that Mr Niasse had been sent a notice to file his return for the tax year 2016/17 on 6 April 2017, but had failed to file the return on time; HMRC requested information relating to the grounds of appeal against the penalty assessment and asked whether the appeal should also extend to the other penalties; and Elliotts Shah confirmed that the appeal should extend to all penalties (not just those for the tax year 2016/17).

Also on 25 June 2021, HMRC wrote to the Tribunal requesting a direction, inter alia, that Mr Niasse should be required to confirm if the matters under appeal should include any penalties other than penalties charged in relation to the late submission of the tax return for the tax year 2016/17 and if so: to confirm which penalties are subject to appeal; to seek permission from HMRC to agree to a late appeal where no such appeal had already been submitted; and to submit grounds of appeal against the late filing penalties.

Mr Niasse served amended grounds of appeal on 6 July 2021. In relation to the penalties, Mr Niasse sought permission to amend the notice of appeal to include all the penalties for late filing of returns and set out the following grounds:

In an email of 4 August 2021, HMRC wrote to Elliotts Shah asking for confirmation of the specific penalties that Mr Niasse was seeking to appeal, the reasons for not submitting the appeals any earlier, and the proposed grounds of appeal for each penalty.

Elliotts Shah responded to HMRC in an email of 17 August 2021 addressing HMRC’s requests. In relation to the grounds of appeal in relation to the penalties, the email stated:

On 1 September 2021, the Tribunal issued directions to the parties. Those directions required:

In an email of 27 September 2021, HMRC asked Elliotts Shah to confirm the penalties which Mr Niasse was seeking to appeal (by reference to a table similar to the one at [136]) and also to confirm that the grounds of appeal were those set out in Elliotts Shah’s email of 17 August 2021.

Elliotts Shah responded on the same day confirming “the reasons for the late submissions” were those referred to in HMRC’s email (i.e. the grounds as set out in Elliotts Shah’s email of 17 August 2021). We infer that the reference to “late submissions” should have been to the reasons for the “late appeals”, as that was the question asked by HMRC.

On 7 October 2021, Elliotts Shah confirmed by email the details of the penalties which are under appeal.

The arrangements regarding the role of agents in professional football have to be viewed in the context of the regulatory environment, in particular, the FA Regulations. The appendix to this decision notice contains some of the relevant provisions of the FA Regulations to which the parties referred in argument.

The issues before the Tribunal divide into those which relate to the deductibility or otherwise of the payments made by Everton to Mr Rita on Mr Niasse’s behalf from Mr Niasse’s employment income and those which relate to the imposition of penalties.

We will begin with the issues relating to the deductibility of the payments.

Mr Niasse accepts that the payments made by Everton to Mr Rita on his behalf are either taxable as employment income under section 62 ITEPA or as an employment-related benefit under section 201 ITEPA. The question is whether the payments are deductible from his employment income under section 336 ITEPA or section 352 ITEPA.

Under section 336 ITEPA a deduction is allowed for certain expenses incurred wholly, exclusively, and necessarily in performance of the duties of an employment. Section 336 provides as follows:

The parties addressed the two limbs of section 336(1) separately. We will do the same.

Mr Blades says that Mr Niasse was obliged to incur the agent’s fees as a holder of his employment with Everton.

Mr Purnell submits that Mr Niasse was not obliged to incur the agency fees as a holder of his employment with Everton.

We were referred by the parties to various authorities on the meaning of “obliged to incur” in section 336(1)(a). Those authorities included, but were not limited to, Ricketts v Colquhoun [1926] AC 1 (“Ricketts”), Shortt v McIlgorm [1945] 1 ALL ER 391 (“Shortt”), Lomax v Newton [1953] 1 WLR 1123 (“Lomax”), Brown v Bullock [1961] 1 WLR 1095 (“Brown”), Elwood v Utitz (1966) 42 TC 482 , Fitzpatrick v IRC [1994] 1 WLR 306, Madeley v HMRC [2006] STC (SCD) 513 (“Madeley”), and HMRC v Banerjee [2011] 1 WLR 702 (“Bannerjee CA”).

We do not propose to conduct a comprehensive review of the case law. We have instead set out below the principles that we draw from it. There is an inevitable degree of overlap between these principles and those that are relevant to the second limb of section 336(1).

The case law is clear that the test in section 336(1)(a) ITEPA is whether the duties of the employment impose the liability to incur the relevant expense (Brown at p1102 per Donovan LJ).

There is no argument between the parties that the duties of Mr Niasse’s employment with Everton encompassed his duties as a player under the Premier League Contract, in particular, his obligations under clause 3 of that agreement. The parties differ, however, in their views of the Tripartite Contract.

Mr Blades submits that the Tripartite Contract is part of the contractual framework for Mr Niasse’s employment with Everton. The payments to Mr Rita were made pursuant to that contract and accordingly as part of the duties of his employment.

On his analysis, the payments of the agency fees to Mr Rita by Everton on behalf of Mr Niasse were payments for a bundle of services which included not just Mr Rita’s services in negotiating the terms of the transfer and any subsequent amendments to Mr Niasse’s employment contract on Mr Niasse’s behalf (the “Player Services”) but also the “Further Services” set out in clause 13 of the Tripartite Contract. Those Further Services – which were expressed to be “for the benefit of the Club and the Player” and “to encourage a future stable relationship between the Club and the Player” (see clause 1(f)) – continued throughout Mr Niasse’s employment with Everton.

We reject this submission. In our view, the duties of Mr Niasse’s employment in this case are defined by reference to the Premier League Contract, that is, in essence, his duties as a professional footballer. The Tripartite Contract is not part of the “contractual framework” of Mr Niasse’s employment as Mr Blades described.

It follows that the payments of the agency fees to Mr Rita are not imposed by the duties of Mr Niasse’s employment with Everton.

Even if we are wrong in our interpretation of the Tripartite Contract, and the Further Services should be treated as provided by Mr Rita to both Everton and Mr Niasse, the position is unchanged. In our view, the case law demonstrates that, if the payment of the agency fees are to be deductible under section 336 ITEPA, the expenditure must be obliged by duties which form an “intrinsic” part of the job that Mr Niasse was paid to perform in his employment (to adopt the language of Henderson J in Bannerjee HCT [34]). The intrinsic duties of Mr Niasse’s employment were those that he performed for Everton as a professional footballer. They were the duties that every professional footballer was obliged to undertake relating to the playing of football. Those were the duties in clause 3 of the Premier League Contract. Mr Niasse did not obtain any service that related to those duties from Mr Rita.

We also reject Mr Blades’s submission there was any other obligation on Mr Niasse to appoint an agent.

For these reasons, the obligation to pay the agent’s fees – paid by Everton on behalf of Mr Niasse under the terms of the Tripartite Contract – was not imposed by the duties of Mr Niasse’s employment. The requirements of section 336(1)(a) ITEPA are not met in this case.

Mr Blades for Mr Niasse says that the requirements of section 336(1)(b) are met.

Mr Purnell says that the requirements of section 336(1)(b) are not met.

Once again, we were referred by the parties to various authorities in support of their arguments. As before, we do not propose to embark upon a comprehensive review. We will simply state the main principles that we take from them. As we mentioned above, there is significant overlap with the case law relating to the first limb of section 336(1).

We agree with Mr Purnell that the agency fees were not incurred wholly, exclusively and necessarily in the performance of the duties of Mr Niasse’s employment.

Mr Blades makes a similar argument in relation to the obligations of Mr Niasse under the Tripartite Contract as he made in the context of section 336(1)(a) ITEPA. In short, he says that the Tripartite Contract forms part of the contractual framework of Mr Niasse’s employment and so the engagement of an agent and the payment of the agency fees were actions undertaken in the performance of the duties of that employment.

We reject that submission. For the reasons that we have given above, in our view, the Tripartite Contract was not part of the contractual framework of Mr Niasse’s employment. Even if it was, applying the distinction drawn by Henderson J in Banerjee HCT, the duties of the employment of Mr Niasse that are relevant for this purpose are the duties that form an intrinsic part of the job that Mr Niasse was engaged to perform and not those that are collateral to it. In our view, those duties are reflected in Mr Niasse’s obligations under the Premier League Contract to play football for Everton. The engagement of an agent was at best collateral to those duties and the agency fees were not paid in performance of them.

We are supported in that view by the case law relating to the payment of agency fees in other contexts, principally Shortt and Madeley. That case law demonstrates that a liability to pay an employment agency to find a job cannot be regarded as incurred in the performance of the duties of the employment itself (Shortt p392C). The same applies to a liability to pay an agent whose job involves negotiating an employment contract (Madeley [79]) and/or the provision of continuing services such as the monitoring of an employment contract and future representation of the employee (Madeley [84]). In Madeley, the Special Commissioner (Howard Nowlan) explained the point in this way (Madeley [83]-[84]):

We agree. The result must be the same even for liabilities to pay the fees of an agent, such as Mr Rita, who is engaged not only to negotiate the employment contract, but also to undertake any future renegotiation of the contract and would be the same even if some of the fees related to the payment of the Further Services under the Tripartite Contract, which were designed to create a stable relationship between the club and Mr Niasse. These services are provided to bring about the employment relationship, to negotiate the terms or renegotiate the terms under which the duties of the employment will be performed, or to provide a better environment under which those duties will be performed. They are not required in the performance of the duties of the employment themselves.

For these reasons, in our view, the agency fees were not incurred necessarily in the performance of the duties of Mr Niasse’s employment and so the requirements of section 336(1)(b) are not met. We do not need to decide whether the fees were paid “wholly or exclusively” in the performance of those duties for the purpose of this decision and we do not do so.

The agency fees are not deductible under section 336 ITEPA.

Under section 352 ITEPA a deduction is allowed for certain agency fees paid by an “entertainer”. Section 352 provides as follows:

There were two issues between the parties on the application of section 352: (i) whether Mr Niasse could be regarded as an “entertainer” within section 352(4) and (ii) whether the agency fees paid to Mr Rita were calculated as a percentage of the whole or part of the earnings from Mr Niasse’s employment.

We will turn to some of the detail of the parties’ submissions in the discussion below. However, it will assist our explanation if we first summarize their positions.

In summary, Mr Blades submits that a broad interpretation should be given to the definition of “entertainer” in section 352(4). Mr Niasse was an “entertainer” within that definition. He says:

Mr Purnell submits that Mr Niasse is not an “entertainer” within section 352(4) ITEPA.

In their submissions, both parties referred to the legislative history. We have been taken, for example, to the Hansard debates relating to the introduction, in 1990, of section 201A of the Income Corporation Taxes Act 1988 (“ICTA”), which became section 352 ITEPA as part of the Tax Law Rewrite Project, and also to the explanation of the provisions in the explanatory notes to ITEPA. There is also an explanation of this legislative history in Madeley to which both parties refer.

The key points that we take from these materials and authorities are as follows:

One point that was at issue between the parties in this case was the extent to which there was intended to be any symmetry between the provisions of the employment agencies legislation and provisions of section 201A ICTA, which became section 352 ITEPA. Mr Blades suggested that there was intended to be some symmetry. However, we reject that submission. It is not possible to discern any such policy from the wording of the legislation itself. As can be seen, on its terms, the deduction provided by section 352 ITEPA is restricted to fees paid by taxpayers who are engaged in certain occupations as identified by the definition of “entertainer” in section 352(4). Whilst the wording of section 352(4) is in some respects similar to that of Schedule 3 to the Employment Agencies Regulations, the list in section 352 is far shorter than the list in Schedule 3, and notably, for present purposes, does not include professional sportspersons whereas Schedule 3 to the Employment Agencies Regulations does.

Even if it were possible to have a reference to the statements of Ministers set out in the extracts of Hansard to which we have been referred – many of which were recited in Madeley – those extracts would appear to confirm that the deduction introduced in section 201A ICTA (and reflected in section 352 ITEPA) was designed specifically to meet lobbying from members of the acting profession and entertainment industry. The government was particularly concerned not to extend the mitigation provided by what is now section 352 ITEPA more widely. This leaves open the possibility that some persons engaged in professions which can be charged fees by employment agencies (because their occupations fall within Schedule 3 to the Employment Agencies Regulations) will not be able to claim a deduction for those fees under section 352. The Special Commissioner in Madeley recognizes this point (Madeley [53]):

We conclude therefore that, whilst section 352 may have origins which are to an extent linked to the employment legislation and the fact that some of the occupations listed in section 352(4) may be charged fees by employment agencies, the tax legislation and the employment agencies legislation operate independently. It is not a requirement of section 352 that a person be engaged in one of the occupations listed in Schedule 3 of Employment Agencies Regulations in order to obtain a deduction for the agency fees; equally not all persons engaged in occupations under Schedule 3 of the Employment Agencies Regulations and who are charged an agency fee will be able to obtain a deduction for it under section 352 ITEPA.

We must now turn to the specific arguments raised by Mr Blades on behalf of Mr Niasse. The first is that Mr Niasse was a “theatrical artist” within the definition in section 352(4). The only authority to which we have been referred on this question is Madeley (to which we have already referred on occasion above).

That case concerned agency fees paid by the presenters of the morning television magazine programme “This Morning” by its hosts, Richard Madeley and Judy Finnigan. The agency fees were paid to their agent, Ms Sweetbaum, not for finding them employment – Richard and Judy were already employed by the television company before Ms Sweetbaum was engaged – but for negotiating and renegotiating their contracts and their remuneration whenever they came up for renewal and representing them more generally on other matters.

The Special Commissioner decided that Richard and Judy were to be treated as “theatrical artists” within section 201A ICTA (the predecessor to section 352 ITEPA) and were entitled to deduct the agency fees from their employment income.

The Special Commissioner’s interpretation of the meaning of “theatrical artist” for this purpose is set out at [53] (Footnote: ²) to [57] as follows:

He then tested his initial interpretation by reference to the relevant HMRC press release and the statements in the Hansard report of the debates in Parliament surrounding the introduction of the provision. He confirmed his initial interpretation at [69].

At [70] to [75], the Special Commissioner then considered the position of various other presenters, gameshow hosts, newsreaders and other personalities to determine whether or not they would fall within his definition. He suggested that some would meet his criteria and others would not, but he concluded at [75] as follows:

We are not bound by the decision of the Special Commissioner in Madeley. However, it is persuasive authority and, in any event, we agree with it. The key points that we take from the Special Commissioner’s decision in relation to the interpretation of section 352(4) are that:

Mr Blades says that Mr Niasse should be treated as a “theatrical artist” within this definition. He says the term should be given a wide meaning: there is no requirement that the employee in question should perform in a theatre; a footballer is engaged to entertain; and football fans and commentators often refer to performance by footballers and the stadiums in which they perform in terms similar to those used in relation to theatrical or television performers.

We are not persuaded by Mr Blades’s arguments. Even if the definition of “theatrical artist” can extend beyond performers in theatrical and television productions as might be suggested by some of the exchanges in the parliamentary debates which are referred to in Madeley, the definition of “theatrical artist” in section 352(4) does not, in our view, extend to professional footballers. A professional footballer does not perform with a “theatrical bent” in the manner required by that section. A footballer is not “putting on an act” when he or she performs his or her professional duties.

To the extent that it is relevant, in our view, the reference to the employment legislation does not support Mr Niasse’s case. It would suggest that models and sports people have been deliberately omitted from the list of those occupations that are entitled to a deduction. The Special Commissioner recognized this potential gap in his decision in Madeley, and specifically referred to the fact that professional footballers would be amongst those who would not be entitled to claim a deduction under section 352.

Furthermore, as Mr Purnell pointed out, in other parts of the tax legislation, where a provision is intended to extend to sports people specific provision is made (see section 226E ITEPA, sporting testimonials).

We conclude therefore that Mr Niasse is not a “theatrical artist” within section 352(4) ITEPA.

Mr Blades also says that we have to take into account the ordinary meeting of the defined term itself (i.e. “entertainer”) when we form a view of the scope of the definition. Mr Blades relies on the statement of Lord Hoffmann in his judgment in Oxford County Council (at [38]) and the decision of the Upper Tribunal in Scott v HMRC [2018] UKUT 236 (TCC) (at [36]) in support of this proposition.

We accept the general principle that the ordinary meaning of the defined term itself can be used as an aid to the interpretation of a statutory definition particularly where the definition is ambiguous. As Lord Hoffmann put it in Oxford County Council (at [38]) “in construing a definition one does not ignore the ordinary meaning of the word which Parliament has chosen to define”. However, that does not change our view. Whilst a professional football player may “entertain”, it would not be usual to describe a professional footballer as an “entertainer” in normal parlance. In any event, in our view, although there may be other respects in which the definition in section 352(4) is ambiguous, the other factors that we have identified above demonstrate clearly that a sports person is not to be included within the definition.

We conclude therefore that Mr Niasse is not an “entertainer” within section 352(4) ITEPA.

There is also an issue between the parties as to whether the fees paid by Everton to Mr Rita on behalf of Mr Niasse are calculated as a percentage of the whole or part of Mr Niasse’s earnings from his employment for the purposes of section 352(1) ITEPA.

We have concluded that Mr Niasse is not a “theatrical artist”and is not otherwise an “entertainer” within section 352(4). That is sufficient for us to conclude that a deduction is not available to Mr Niasse for the payments of the agency fees under section 352 ITEPA. We have, however, heard full argument on this issue and so will set out our views on the points that the parties have raised.

The agency fees to be paid by Everton on behalf of Mr Niasse are set out in clause 7 of the Tripartite Contract. They are stated as fixed sums and are not on their terms calculated by reference to the earnings of Mr Niasse’s employment. However, Mr Blades says that the agency fees meet the requirements of section 352(1) for the following reasons.

We do not regard the first two of these arguments as sustainable.

As regards his final point, Mr Blades, in argument, presented a calculation which was designed to show that the amounts paid to Mr Rita under the Tripartite Contract by Everton and Mr Niasse when taken together reflected the original 10% fee set out in the Representation Contract. Even on the basis of the figures that he presented, the calculation did not produce the correct figure. For our part, Mr Blades failed to meet the burden upon him to show that this requirement was met. We reject this submission.

In our view, the fees paid to Mr Rita on Mr Niasse’s behalf were not calculated as a percentage of the whole or part of the earnings from Mr Niasse’s employment for the purposes of section 352(1) ITEPA. If, contrary to our view as set out above, Mr Niasse should be regarded as an “entertainer” within section 352(4) ITEPA, he would still not have been entitled to a deduction for the agency fees under section 352 ITEPA.

For these reasons, Mr Niasse is not entitled to a deduction for the agency fees under section 352 ITEPA.

The final part of this decision notice relates to Mr Niasse’s appeal against penalties for the late filing of tax returns for the tax years 2015/16, 2016/17 and 2017/18.

There is no dispute that Mr Niasse’s tax returns for the tax years 2015/16 and 2016/2017 were filed on 23 April 2019 and his return for the tax year 2017/18 was filed on 18 April 2019.

The amounts and nature of the penalties that have been charged and are subject to appeal are also not in dispute. They are set out in the table below.

The issues before the Tribunal in relation to these penalties are as follows:

In addition to these issues, Mr Purnell says that the question as to whether Mr Niasse received notice under section 8 TMA to file the relevant return is not before the Tribunal and so the Tribunal has no jurisdiction to decide upon it. We will address this question first.

By way of background, the penalties in this case were charged under Schedule 55 Finance Act 2009. The parties agree that, in order to impose a penalty under Schedule 55 for the late submission of a return, HMRC must prove that a notice under section 8 TMA was given to the taxpayer by HMRC. We were referred by the parties to the decision of the First-tier Tribunal (“FTT”) in DJ Wood v HMRC [2018] UKFTT 0074 (TC) at [29] in support of this proposition. That decision is not, of course, binding upon us, but a similar conclusion is found in the decision of the Upper Tribunal in HMRC v Rogers and Shaw [2019] UKUT 406 (TCC) (“Rogers”) at [49], which is.

Mr Purnell says that the question as to whether Mr Niasse received a section 8 TMA notice is not before the Tribunal. Mr Niasse has not pleaded the point. It is not referred to in his notice of appeal or in his amended grounds of appeal. The issue is not referred to in any of the correspondence between the parties following the submission of the notice of appeal. If Mr Niasse wishes to argue the point before the Tribunal, he should make an application for permission to amend his grounds of appeal. But it is far too late to make such an application. The first time at which HMRC was aware that this point may be taken was when Mr Niasse sought to add additional authorities to the bundle on 21 July 2023. The correct approach for the Tribunal in the circumstances is to refuse to permit the point to be taken. If the Tribunal allows the point to be argued, HMRC should be given time to adduce further evidence. If the Tribunal did not do so, HMRC would be deprived of the opportunity to produce evidence to meet the point. That would be procedurally unfair.

Mr Blades says that the question of the issue of a section 8 TMA notice is clearly before the Tribunal. It was referred to in the parties’ correspondence at various points. Mr Niasse does not need to make an application to amend his grounds of appeal.

On this point, we have been referred by Mr Purnell to the decision of the Upper Tribunal in Rogers. A similar point to that raised by Mr Purnell arose on appeal to the Upper Tribunal in that case. The FTT had allowed an appeal by the taxpayer against a penalty under Schedule 55 for the late submission of a return on the grounds that the taxpayer had not been given a notice falling within section 8 TMA. One argument raised by HMRC on their appeal to the Upper Tribunal was that the FTT should not have considered whether a notice under section 8 TMA had been given to the taxpayer because it was not a pleaded ground of challenge and was not therefore before the Tribunal.

The Upper Tribunal concluded that it was procedurally unfair to HMRC for the FTT to have decided the question as to whether a section 8 TMA notice had been given without having permitted HMRC an opportunity to respond to the point or to provide evidence addressing the FTT’s concerns (Rogers [48]). The main points of the Upper Tribunal’s reasoning on this issue were as follows:

On the facts of this case, it is clear that the question of whether or not a notice under section 8 TMA has been issued to Mr Niasse was a matter of dispute before the notice of appeal was submitted by Mr Niasse (see, for example, the emails from Elliotts Shah dated 7 February 2019 and 18 April 2019). Mr Niasse’s notice of appeal, however, contained no grounds of appeal in relation to the appeals against the penalty assessments. The amended grounds of appeal included only grounds that are relevant to the final question that we need to decide, namely whether or not Mr Niasse had a reasonable excuse for the late filing of his returns.

Following the submission of the notice of appeal and amended grounds of appeal, there was an exchange of correspondence between the parties which sought to resolve the questions of the penalties which were subject to appeal. In that correspondence Elliotts Shah also confirmed that the grounds of appeal in relation to all the penalties included that Mr Niasse “may not have seen or received HMRC’s communications” (see Elliotts Shah’s email of 17 August 2021, as confirmed in their email of 27 September 2021). There is no specific reference in those exchanges to Mr Niasse not having received a notice under section 8 TMA. There is also no evidence that this exchange was shared with the Tribunal notwithstanding the Tribunal’s direction of 1 September 2021.

We have come to the view that, on balance, the point is not a new issue and should properly be regarded as being before the Tribunal. We acknowledge that the point is not properly formally pleaded. However, the point was clearly at issue between the parties before the submission of the notice of appeal. The notice of appeal and the amended grounds of appeal did not correctly refer to the penalties and HMRC, to their credit, took some steps to clarify the scope of the appeal. Although the wording of Elliotts Shah’s email of 17 August 2021 is not particularly precise – the reference to not having “seen or received HMRC communications” could be taken to refer to the receipt of penalty assessments or other correspondence in addition to the receipt of the section 8 TMA notice itself – and we would have expected great clarity in professional correspondence, read in the context of the earlier exchanges, in our view, it should be regarded as including a reference to section 8 TMA notices. Accordingly, in exercise of our powers under FTR 5(3), we would permit Mr Niasse to make submissions on this point. In arriving at this conclusion, we are mindful of the overriding objective “to deal with cases fairly and justly” in FTR 2(1) and in particular the injunction in FTR 2(2)(b) to avoid “unnecessary formality”.

That having been said, the correspondence with Elliotts Shah was not as clear as might have been reasonably expected. We can understand why HMRC may not have regarded the point as continuing to be in issue. As a result of the conclusions that we have reached below, we do not need to address this point. However, if we had not reached those conclusions, we would have considered that procedural fairness required us to permit HMRC to introduce further evidence to address the point and to allow them time to do so.

In Rogers, the Upper Tribunal provided some guidance to the FTT for dealing with cases in which it is asserted by a taxpayer that HMRC had not given notice to file a return under section 8 TMA. In summary, the Upper Tribunal advised as follows:

In the present case, the evidence before us comprises:

We acknowledge the Upper Tribunal’s caution (in Rogers [55]) concerning relying on the entries in HMRC’s computer systems alone as evidence of service of a notice to submit a return. As in this case, that evidence tends not to show the precise date on which a return was issued. However, we consider that the weight of the evidence is sufficient to demonstrate that on the balance of probabilities the notices were issued in this case.

The height of Mr Niasse’s case as set out in the email from Elliotts Shah of 17 August 2021 is that Mr Niasse “may not have seen or received HMRC’s communications” (our emphasis) because he was playing at other clubs at the time. It is not part of Mr Niasse’s case that the notices were not sent to the correct address. Accordingly, we conclude that notices under section 8 TMA were given to Mr Niasse to make or deliver a return for each of the relevant tax years.

As we have mentioned above, HMRC accepts that a timely appeal was made against the penalties issued on 26 March 2019 and 16 February 2021 (Footnote: ³). Mr Niasse does not need permission to make an appeal against these penalties.

As regards the other penalties, all the appeals were made on 7 February 2019. They were all made promptly following the appointment of Elliotts Shah. However, all of these appeals were made after the expiry of the 30-day period permitted by section 31A TMA. They were all late, and in all cases considerably late as shown in the table at [136] above.

The question for us is whether we should exercise our discretion under section 49(2)(b) to permit a late appeal. In its decision in Martland v HMRC [2018] UKUT 178 (TCC) (“Martland”), the Upper Tribunal set out (at Martland [44]-[45]) a three-stage process that the FTT might usefully follow when considering applications for permission to appeal out of time as follows:

We have already addressed the first stage of this process. The delays in this case are both serious and significant.

As regards the second stage, the reasons that Mr Blades gives in his skeleton for the late appeals against these penalty assessments are that:

In argument, Mr Blades also relied on the argument that Mr Niasse did not receive a notice to file a return – an assertion that we have addressed above – but we also consider as a possible reason the argument that Mr Niasse “may not have seen or received HMRC’s communications” as set out in the email from Elliotts Shah of 17 August 2021.

We should deal first with the argument that Mr Niasse could not give notice of an appeal against the penalties until he had filed the relevant returns. This point derives from HMRC’s letter to Elliotts Shah of 22 March 2019.

Neither counsel provided any authority in support of this suggestion. Paragraph 20 Schedule 55 FA 2009 contains the right of appeal against a penalty imposed under Schedule 55. It provides simply that:

There is no limitation of which we are aware to suggest that a taxpayer may only appeal against a penalty under Schedule 55 FA 2009 for late submission of a return once the relevant return has been filed. We can only conclude that the suggestion in HMRC’s letter of 22 March 2019 was simply wrong. Mr Niasse could have appealed against the penalty assessments when they were made. The usual time limit as set out in section 31A TMA applied.

That having been said, a representation was made by HMRC in their letter of 22 March 2019 to the effect that Mr Niasse could only appeal against the penalty assessments once the returns had been filed. We have no doubt that this representation affected Elliotts Shah’s approach – a revised appeal was not made until the returns were submitted on 18 April 2019 – however, it did not affect Mr Niasse’s initial failure to appeal against the penalty assessments. The representation was made after Elliotts Shah made the appeals on behalf of Mr Niasse on 7 February 2019. There is no evidence of HMRC having made a representation at an earlier time. If we accept that the appeals were validly made on 7 February 2019 rather on 18 April 2019, as we do in the table at [136] above, the appeals were still significantly out of time.

We have also considered whether there is substance to Mr Niasse’s assertion that he “may not have received” communications from HMRC. On the balance of probabilities, we are not satisfied that this was the case. We have not seen any evidence to support this assertion. Indeed the evidence suggests that Mr Niasse did receive the notices of assessment as he was able to pass them and other communications on to Elliotts Shah before they submitted the appeals on 7 February 2019.

It follows that Mr Niasse has not shown any good reason why the Tribunal should permit him to make an appeal out of time. Having also taken into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected, we refuse to extend the time period for appeals against the penalties that were issued on 24 March 2017, 17 September 2017, 22 March 2018, 29 March 2018, and 16 September 2018.

The final issue that we must address is whether Mr Niasse had a reasonable excuse for his failure to submit his returns on time.

Paragraph 23 Schedule 55 FA 2009 provides that a liability to a penalty for a failure to submit a return does not arise if the taxpayer satisfies the Tribunal that there is a reasonable excuse for the failure.

Paragraph 23 provides as follows:

The Upper Tribunal provided guidance to the FTT on the approach to be taken in cases involving the reasonable excuse defence in its decision in Perrin v HMRC [2018] UKUT 156 (TCC) (“Perrin”). The Upper Tribunal said this (at Perrin [81]-[82]):

As a starting point, it follows from our refusal to permit Mr Niasse to make appeals out of time in relation to some of the penalty assessments, that this section applies only to the penalty assessments that were appealed in time (that is those in the final four rows of the table at [136] above). Those penalties relate only to the late submission of returns in relation to the tax years 2016/17 and 2017/18.

If we follow the guidance in Perrin ([at 81]) we should first establish the facts that Mr Niasse asserts give rise to a reasonable excuse.

The facts on which Mr Niasse relies are expressed differently in his grounds of appeal, the various emails from Elliotts Shah and in Mr Blades’s skeleton argument, but, in summary, Mr Niasse gives the following reasons for his failure to submit his returns on time:

The next stage is to determine which of those facts are proven.

We therefore move to the third stage which is to decide whether the facts as proven do indeed amount to an objectively reasonable excuse taking into account the experience in other relevant attributes of Mr Niasse and the situation in which he found himself.

As we have mentioned above, Mr Niasse asserts that he believed that on his arrival in the UK that he did not need to file a tax return. Even if we accept that assertion on the basis of Mr Shah’s evidence, we note that the relevant penalties for these purposes relate to the late filing of the returns for the tax years 2016/17 and 2017/18. By the time that these returns were due, Mr Niasse was in receipt of the notices to file the tax returns and several reminders in relation to the tax year 2015/16. They would have put him on notice that he may have an obligation to file a return. Furthermore, Mr Niasse is a professional footballer. He was supported by professional advisers, such as Mr Rita. He had not inconsiderable income and yet failed to obtain relevant advice and to file his returns despite these promptings.

We conclude that Mr Niasse did not have a reasonable excuse for his failure to file his returns for the tax years 2016/17 and 2017/18.

For the reasons that we have given:

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.