The issue was whether the appellant football club was entitled to input tax credit for VAT paid on the fees of players’ agents. There was agreement that the appellant had paid the fees, but the commissioners contended that the agents had rendered their services to the players rather than to the club.

The tribunal heard consolidated appeals relating to a series of assessments issued to the club which were designed to recover input tax claimed in respect of players’ agents fees. The assessments related to 29 separate payments, but by the time of the hearing the tribunal was asked to consider only 14 disputed transactions. At the relevant time, the club was a member of the English Premier League. It was subject to the rules of that league and to the rules of the governing body in England, the Football Association (FA). Like other professional football clubs, the club was dependent for its success on the quality of its players. Consequently, it sought from time to time to engage new players and to renew the contracts of existing players. Since almost every professional footballer playing in the Premier League was represented by an agent, it was inevitable that negotiations by clubs in relation to a player would involve an agent.

The club argued that in each disputed transaction, and notwithstanding the agent's relationship with the player, the agent had acted for the club. It contended that, as its managing director had demanded, the agent had provided the club with a service of ‘delivering’ a player, or procuring a player's agreement to new contract terms or his agreement to leave the club. The club submitted that its payment to the agent was for that service and that service alone. Alternatively, the club argued that the agent represented both the player and the club, but had rendered a service to the club for which the payment made was consideration.

The commissioners argued that the express provisions in some agreements between the players and agents, that the agent would endeavour to ensure the employer paid his fees, reflected the reality that the agent acted for the player, but that the club paid the agent's fees. This situation was clouded by the documentation sent to the FA by football clubs which was designed to enable the club to recover VAT and to avoid the need to declare the payment as a benefit-in-kind to the player on which he would be liable for income tax. In the present case, the documentation contained a false assertion that the club had a written agreement with the agent.

The tribunal observed that it was not possible to take the documentary evidence produced by the club at face value, including the claim made in post-transfer documents sent to the FA that the agents had acted only for the club. Nor did the evidence suggest that the agents adhered scrupulously to the rules. The biggest obstacle for the club was the need to satisfy the tribunal that the agents abandoned their player clients in order to represent the club in transfer negotiations. In the view of the tribunal, the agents did not act in this way. Although some of the agents had indicated in letters to the club that they had assisted the club, none, with one exception, stated that he had ceased to represent his player client. It was inconceivable, in the opinion of the tribunal, that a player who had engaged an agent to act on his behalf in negotiations with the club would knowingly and willingly accept that the agent should abandon that role and instead represent the club, quite possibly against his interests.

The club's alternative argument, that the agents represented both the player and the club or alternated between the two, was rejected by the tribunal. The agent did not solely represent the club at any time for the reason already given, that this would mean abandoning the player. Also, the agent did not represent both the player and the club, thereby giving rise to a right to deduct VAT. A fundamental principle in VAT was that in order to establish a right to deduct, the person paying must be the recipient of a supply of something to be used for his business of making taxable supplies. ‘Supply’ in this context implied a reciprocal obligation on the one hand to provide goods or a service and on the other to make a payment. In the cases in which the agent had a representation agreement with the player, the necessary reciprocity between the club and the agent was missing. In only four of the transactions in dispute did the tribunal find that the club had a right of deduction of input tax.

The tribunal allowed the club's appeal in part, that:

1. In relation to three transactions, the agent did represent the club and not the player. In another transaction, the agent represented the club in negotiating with the selling club and to the extent that the agent's fee was attributable to that negotiation it was consideration for a service rendered to the club. The VAT on these transactions was deductible as input tax by the club.
2. In relation to negotiation of players’ terms, the agent did not provide a service to the club and the VAT charged by the agent was not input tax of the club.
3. In relation to all other transactions, the agent did not render a service to the club and it had no entitlement to input tax credit.

No. 20,151