In the case of Jerome Anderson v HMRC which was heard by the Upper Tier Tribunal the decision by the First Tier Tribunal to disallow the application of losses of a football academy run by the football agent was upheld on the basis that it was not considered to be run on a commercial basis with a realistic expectation of making a profit. The case was as follow
- Mr Anderson woked quite successfully as a football agent for a number of years (amongst his portfolio of clients were players such as Thierry Henry and Denis Bergkamp). His work was carried out via his company, Jerome Anderson Management Limited.
- In 2009 Mr Anderson paid a sum of £3 million to a soccer academy based in South Africa called Bafana Soccer Developments Limited. In return for the payment he secured the rights to transfer fees for three chosen players chosen from a provided list of 20 players.
- In 2011 Bafana was put into administration and Mr Anderson claimed trading losses of £3 million in his 2008/9 tax return.
- The First Tier Tribunal denied his claim to sideways loss relief on the basis that there appeared to be no profit motive and a lack of commerciality with respect to the transaction and due to Mr Anderson falling foul of the anti avoidance provisions.
- Mr Anderson therefore appealed to the Upper Tier Tribunal
During the Upper Tier Tribunal hearing
- It was agreed that Mr Andersons activities of taking financial advice, holding meetings and viewing footage of the players from DVD’s did not in themselves constitute a trade and was more closely aligned with that of an investor, and even if they had, he had not carried on a trade with a view to making a profit.
- They also agreed that the First Tier Tribunal was entitled to arrive at the conclusion that Mr Andersons arrangements were actually relevant tax avoidance.
As a final point there was the consideration of whether HMRC had made a valid discovery assessment under s29 TMA 1970. The Upper Tier Tribunal agreed with the First Tier Tribunal that there was a valid discovery and also said that the First Tier Tribunal had in fact applied a stricter test than was required in arriving at a decision, as to whether the HMRC officer reasonably believed that there had been insufficient tax declared.