In a recent tax case, Jerome Anderson v HMRC, the First-Tier Tribunal denied a football agent relief for trading losses. The judges’ arguments centred on the issue of whether he was carrying on a trade, and if he was, was it on a commercial basis with a view to making profits?
There is already legislation in place that restricts any relief for trading losses if the trade is not commercial. The facts of the case were as follows:
- Mr Anderson (Mr A) worked successfully as a football agent for many years, representing a number of big name players such as Dennis Bergkamp and Thierry Henry.
- In January 2009 Mr A paid £3 million to Bafana, a soccer academy in South Africa, through a scheme marketed by a Jersey company.
- In return for the money paid he was able to choose three players from the academy, securing an interest for himself in any future transfer fees.
- Bafana went into administration in 2011 and Mr A received no significant income.
- Mr A claimed trading losses of £3 million in his 2008/09 tax return.
HMRC disallowed the losses.
Despite Mr A’s arguments that his activities under the Bafana scheme constituted a trade, and that he was more than a passive investor, the court agreed that the losses should be disallowed. Evidence pointed to a scheme to avoid tax rather than a genuine commercial undertaking.