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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Birmingham City Football Club Plc v Revenue & Customs [2007] UKVAT V20151 (02 May 2007) URL: http://www.bailii.org/uk/cases/UKVAT/2007/V20151.html Cite as: [2007] UKVAT V20151

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20151

VALUE ADDED TAX — input tax — football club paying fees to players' agents acting in transfer of players to or from club — whether agent acting for club alone, for club and player, or for player alone — different findings made in relation to different transactions — in most cases agent found to act for player alone — agent found to act for both club and player in only one case — agents found to act for club alone in three cases — appeal allowed in part

MANCHESTER TRIBUNAL CENTRE

BIRMINGHAM CITY FOOTBALL CLUB PLC

Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS

Respondents

Tribunal: Colin Bishopp

Gilian Pratt

Sitting in public in Manchester on 12, 13 and 17 October and 10 November 2006

Philippa Whipple, counsel, instructed by Deloitte & Touche LLP for the Appellant

Ian Hutton, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007


 


DECISION

Introduction

1. This is an appeal (strictly, two appeals raising identical issues which we directed should be consolidated) by Birmingham City Football Club plc ("BCFC") against a series of assessments covering, collectively, most of the period from 1 December 2000 to 31 August 2003. The assessments are designed to recover input tax for which BCFC claimed and was allowed credit in its VAT returns for the relevant period. The essence of the dispute between the parties is whether BCFC is entitled to credit for the VAT charged on the fees of what are known as players' agents. The Respondents accept that BCFC has paid the fees and the VAT charged on them, but they contend that the agents who, despite their description, may act for clubs as well as players, rendered their services not to BCFC but to various players, those services relating to the transfer of the players to or from BCFC, or the renegotiation of the players' terms and conditions of their continuing employment by BCFC, and that BCFC is correspondingly not entitled to input tax credit. Originally, the assessments related to 29 separate payments but, before the hearing began, the Respondents accepted that in 12 cases the input tax credit was due. They made the same concession in relation to another transaction as the hearing was in progress. We are required to consider only the remaining 16 but since, in two cases, the payment was of the second instalment of a fee due in respect of a relevant transfer, we are required to consider only 14 discrete transactions.
2. Before us BCFC was represented by Philippa Whipple and the Respondents by Ian Hutton, both of counsel. We heard evidence from BCFC's managing director, Karren Brady, and from John Firth, an HMRC officer who had made enquiries of a general nature into the manner in which players' agents are employed in the football industry (and we had statements from both). After the hearing had concluded, we were asked by the Appellant to admit in evidence the Quest report, that is the report of the inquiry conducted by Lord Stevens of Kirkwhelpington into the payment or alleged payment of "bungs" by players' agents to club officials, published on 20 December 2006. The report is not directly relevant to this appeal, though it does throw some light on the practices within the industry. At first, the Respondents resisted the application that we should admit the report but they later agreed that we should do so. We have considered it and the written submissions on it submitted by each party, the last in February of this year.
3. The relevant law was not in issue, and can be dealt with quite shortly. BCFC carries on a wholly taxable business, and is entitled to credit, as input tax, for the VAT it incurs in the acquisition by it of supplies for use in its business: see article 17(2) of the Sixth VAT Directive (77/388/EEC) (which was in force at the relevant time) and section 26 of the Value Added Tax Act 1994, the corresponding domestic provision. If, as the Respondents contend, the agents' supplies were to the players alone, BCFC accepts that it cannot recover the VAT as it has not received a supply; receipt of a supply is essential, and the fact that the person seeking credit has made the payment is not enough. If instead the supplies were made to BCFC, the VAT is recoverable, as the Respondents accept. Slightly different issues arise if we conclude that the supplies were made both to BCFC and the players. The outcome of the appeal is dependent, therefore, on our findings of fact. BCFC accepted that the burden of establishing that it had received the supplies rested on it.

The facts

4. Much of the factual background to the case, too, was not in dispute, and we shall set it out as shortly as we can, without referring extensively to the evidence.
5. At the time with which we are concerned, BCFC was a member of the English Premier League. It was subject to the rules of the League, to the rules of the Football Association ("FA"), of which it was also a member, and to the rules of the Fédération Internationale de Football Association ("FIFA") and of the Union of European Football Associations ("UEFA"), because they had been adopted, so far as relevant, by the FA as part of its own rule structure. BCFC was not, however, a member of or directly regulated by either FIFA or UEFA. The FA's rules are binding on member clubs as a matter of private contract only: R v Football Association Limited ex p Football League Limited [1993] 2 All ER 833, but they are nonetheless binding. Some of the rules to which we were taken did not come into force until after the time with which we are concerned, but the fact of their introduction (they were designed to eliminate what were perceived to be prevalent but undesirable practices in the transfer of players between clubs), like the Quest report, throws some light on the climate in which transactions such as those with which we are concerned were conducted.
6. Like any football club, BCFC is dependent for its success upon the quality of its players. Its income and profitability are dependent on its attracting large attendances to its matches, securing sponsorship and similar advertising revenue, securing payment for television coverage of its matches and maximising its sales of merchandise, all dependent in turn on its team's popularity, a function of its success in competitions. It is correspondingly a matter of some importance to it that it should identify, and attract, players of high quality. At same time because, as is well known, Premier League players command very high earnings, BCFC, again like other clubs, does not wish to retain (and remain liable to pay) players who, for one reason or another, do not meet its requirements. Some of its players join BCFC at the beginning of their playing careers, but for the most part players are acquired by transfer from another club. Players retire altogether from time to time but many leave BCFC by transfer to another club.
7. The FA imposes restrictions on the manner in which players may be transferred. A club (or an agent acting on behalf of a club) may not approach a player who is contracted to another club without the permission of that other club, which may be given in general terms — by the club indicating publicly that it is seeking to transfer the player — or individually, when the player's existing club indicates privately to another club that an approach may be made. In these cases, the player's existing club usually requires a payment — a "transfer fee" — as compensation for the early termination of the player's contract. Sometimes a player becomes available on a "free transfer", that is, one requiring no payment by the acquiring club to the player's former club, because his contract has come to an end, and either he or the club (or both) have decided not to renew it. A player available for free transfer is sometimes known as a "Bosman player" after the name of the player who established (by litigation) that the former club is unable to impose any restriction on his moving, or to demand a fee when he does so. Approaches to players and transfers may take place only in what are known as "transfer windows", that is two periods, one in the summer, outside the main playing season, and the other in January, at approximately the middle of the playing season. We accept that the brevity of the transfer windows puts pressure on clubs to conclude transfers quickly, usually within a matter of a few days, that mistakes in documentation may occur as a result of time pressures, and that for the same reason little of the negotiation is recorded in writing.
8. It is possible also for one club to loan a player to another club. The player remains contractually bound to the lending club, but his remuneration and other benefits are provided by the borrowing club for the term of the loan. A fee may or may not be payable by one club to the other.
9. We understood from the evidence that almost every professional football player, at least those playing in the Premier League and the higher divisions of the Football League, is represented by an agent. The agent may be involved not only in negotiation of the terms on which a player contracts with his club but may represent the player for several other purposes, including for example negotiating sponsorship and advertising agreements into which the player has entered and, in some cases, the agent handles the player's personal financial affairs. Players' agents fall essentially into three categories: those who are, and who hold themselves out as, players' agents properly so called; members of the player's close family (usually, it appears, the player's father); and solicitors and barristers (we understood that there are relatively few solicitor agents and quite possibly none at all who are barristers). Players' agents carrying on business as such are required to pass an examination, to be registered and to comply with a code of conduct. They are regulated by the FA. Family members are not required to qualify or register, and are effectively unregulated. Solicitors and barristers, if they have practising certificates and are regulated by the Law Society or the Bar Council, are not required to register with, or be regulated by, the FA. Players' agents are individuals (the FIFA Regulations refer to them as "natural persons") but for the most part they trade as corporate bodies. Some of the corporate bodies employ only one players' agent and others several.
10. Another FA rule is that no players' agent, including a family member or solicitor, may act for more than one party in any transfer negotiation. It is obscure whether two individuals employed by the same company are treated for these purposes as one agent or two, though it became clear that on some occasions two individuals so employed have in fact acted on opposite sides of the same transaction, apparently without objection by the FA.
11. At the conclusion of any transfer agreement, the receiving club is required to send to the FA various documents, in a prescribed form, recording the transfer and the circumstances in which it was effected. The documentation has changed over the years, but at all material times it required the disclosure of such obvious details as the player's name and address, the identity of the transferring and receiving clubs, and the identity of any agent or agents involved in the transaction. One or more of the forms (there are several) must be signed on behalf of the receiving club, and by the player and the agent or agents, if any have acted in the transaction. If the club has employed an agent, it is required to divulge details of the fee agreed with the agent and, now, it is required also to arrange payment of the fee via the FA — that is, the fee is paid to the FA which passes it on to the agent.
12. It was apparent from the evidence, and from Lord Stevens' report, that regulation by the FA has been less than rigorous. In particular, it became clear to us that, provided the documentation sent by the club to the FA at the conclusion of the transfer was correctly completed — that is to say all the items of information requested were provided, and were consistent each with the others — the information was taken at face value. In a few cases the documentation was rejected by the FA, but only because it was incomplete or self contradictory. Ms Brady told us that, in BCFC's case, no enquiry had ever been made by the FA into the substance of a transfer deal. Whether there had been an enquiry into any other club's dealings did not emerge. Much of the information obtained and produced by Mr Firth bore out that conclusion. It was not proved in evidence, and some might be regarded as anecdotal, consisting of comments by agents and others engaged in the football industry, but it was not challenged and, despite those reservations, it was wholly consistent with the view that the rules and codes of conduct which applied to clubs and agents were frequently disregarded.
13. Throughout the period with which we are concerned, the rules in force in England and Wales were those made by FIFA on 10 December 2000, which the FA had adopted without amendment. The Regulations deal with a great many topics, most of which are of no relevance here. Those which are relevant are as follows:

"Art. 11

A licensed players' agent has the right:

a) to contact every player who is not, or is no longer, under contract with a club (cf. art. 12 and 13 of the FIFA Regulations for the Status and Transfers of Players);

b) to represent the interests of any player or club that requests him to negotiate and/or conclude contracts on his/its behalf;

c) to take care of the interests of any player who requests him to do so;

d) to take care of the interests of any club which requests him to do so.

Art. 12

A players' agent may represent or take care of the interests of a player or a club in compliance with art. 11 only if he has concluded a written contract with the player or club.

Such a contract shall be limited to a period of two years but may be renewed in writing at the express request of both parties. It may not be tacitly prolonged. The contract shall explicitly mention who is responsible for paying the players' agent's fee, the type of fee and the prerequisite terms for the payment of the fee.

The contract shall explicitly mention who is responsible for paying the players' agent's fee, the type of fee and the prerequisite terms for the payment of the fee.

Only the client engaging the services of the players' agent, and no other party, may remunerate him.

The amount of remuneration due to a players' agent who has been engaged to act on a player's behalf is calculated on the basis of the player's annual basic gross income (i.e. excluding other benefits such as a car, a flat, point premiums and/or any kind of bonus or privilege) that the players' agent has negotiated for him in the employment contract.

The players' agent and the player shall decide in advance whether the player will remunerate the players' agent with a lump sum payment at the start of the employment contract that the players' agent has negotiated for the player or whether he will pay annual instalments at the end of a contractual year.

If the players' agent and the player do not decide on a lump sum payment and the player's employment contract negotiated by the players' agent on his behalf lasts longer than the representation contract between the players' agent and the player, the players' agent is entitled to annual remuneration even after expiry of the representation contract. This entitlement lasts until the player's employment contract expires or as soon as the player signs a new employment contract without the help of the same players' agent.

If the players' agent and the player cannot reach agreement on the amount of remuneration to be paid or if the representation contract does not provide for such remuneration, the players' agent is entitled to payment of compensation amounting to 5% of the basic income described in par. 4 above which the player is due to receive from the employment contract negotiated by the players' agent on his behalf.

A players' agent who has been contracted by a club shall be remunerated for his services by payment of a lump sum that has been agreed upon in advance.

FIFA will provide its standard representation contract (cf. Annexe C) to the national associations. Every players' agent is required to use this standard contract. The parties to the contract are at liberty to conclude additional agreements and to supplement the standard contract accordingly, providing the relevant public law provisions for arranging employment in the country concerned are observed without fail.

The representation contract shall be issued in quadruple and duly signed by both parties. The player or the club shall keep the first copy and the players' agent the second. The players' agent shall send the third and fourth copies to his national association, or the national association to which the player or club belongs, for registration within 30 days of their having been signed. The national associations shall keep a register of the contracts being received. Copies of the contracts shall be sent to FIFA upon request.

[Art. 13 makes it clear that players' agents must act as individuals even if they conduct their business by means of a corporate body].

Art. 14

A licensed players' agent is required: …

d) to represent only one party when negotiating a transfer; …"

14. The Regulations also impose, at Annex B, a Code of Professional Conduct, the first three requirements of which are as follows:

"I. The players' agent is required to perform his occupation conscientiously and conduct himself in his profession and other business practices in a manner worthy of respect and befitting his profession.

II. The players' agent shall adhere to the truth, clarity and objectivity in his dealings with his client, negotiating partners and other parties.

III. The players' agent shall protect the interests of his client in compliance with the law and a sense of fairness, while creating clear legal relations."

15. The standard form of representation agreement prescribed by the FIFA Regulations identifies the players' agent, the player, or, as the case may be, the club the agent is to represent, the duration of the contract, specifying (as the Regulations themselves require) that it cannot exceed two years, and the exact date of termination, recites that only the client may pay the agent's remuneration and specifies the remuneration (as a percentage of some items, as a lump sum in other cases). There is then a clause which allows the parties to state whether the "placement rights" (an undefined term) are transferred exclusively, or not exclusively, to the players' agent: one option must be chosen. We have assumed, in the absence of any suggestion by either party to the contrary, that "placement rights" means the right to negotiate employment contracts on the player's behalf. The next clause indicates that additional provisions, consistent with the Regulations, may be included. The standard form then records the requirements for registration set out in the Regulations.
16. Surprisingly, the standard form does not specify what the agent is to do in return for his remuneration. The only clues lie in its description as a "representation contract", and in the linking of remuneration to tasks, which are defined with little particularity. One agent whose agreement substantially followed the FIFA standard form was (using the pseudonyms we explain later) Spain. His agreement with player Violet, described both in the heading and in the text as a "representation contract", only obliquely indicated what the agent was to do, by limiting the remuneration to be received to "employment contracts negotiated by the players' agent" (though we add in passing that the link with and the measure of the remuneration are so vague that this contract would, in our view, be void for uncertainty). Indeed, the Regulations themselves fall far short of the explicit detail one might expect of, say, an English statutory instrument and leave much open to possibly differing interpretations.
17. By contrast, agent Finland's agreement with player Fawn differs considerably from the standard form and, though it still has shortcomings, is much more specific. It contains the following relevant provisions:

"2. Appointment

The Player appoints the Agent, being a licensed FIFA Players' Agent, to act on his behalf in all negotiations and other dealings with the player's prospective employers throughout the United Kingdom during the Term in return for the Payments."

18. We interpose that the "term" is a period of two years from the date of the agreement. The "Payments", the sums due to the agent, are defined (again somewhat imprecisely) as "4% of the total contract. Any VAT or other duties or taxes payable in respect of such sums shall be payable in addition. 20% of gross income generated by any activity other than the Player's playing contract".
19. Clause 4 of the agreement is as follows:

"In consideration of the services rendered by the Agent under this Agreements [sic] the Player agrees:

1 To use his best endeavours to ensure that any Club with who [sic] the Player enters into a Contract of Employment shall make the Payments to the Agent promptly without demand, deduction or set-off in the currency specified in 1.2 hereof [pounds sterling].

2 To personally make the Payments promptly to the Agent should the Player be unable to agree with the Club that it will make the said payment to the Agent.

3 During the Term not to enter into any Agreement of whatever nature with any Third Party whereby the Party shall also be appointed to act as the Players Agent.

4 Not to enter into any negotiations or execute any Contract of Employment with any club throughout the world without engaging the services of the Agent as set out in this Agreement."

20. Agent England appears to have used differing forms at different times. One example we saw (between England and player Green) was in substantially the standard FIFA form, with the addition of an undertaking by the agent that he would:

"(A) Promote you and act in your best interests in relation to any agreements which may be entered into either by [England] on your behalf [or] by yourself.

(B) … refer to you, where practical, all enquiries for … services of any nature to you direct for your approval."

21. Another — though not with any of the players with whose arrangements we are concerned — was in the form of a lengthy letter. It contained the following passage:

"Employment negotiations: We will deal with all aspects of your terms of employment, assisting in negotiations, with transfers or the renegotiation of current deals. In particular, we will negotiate your salary, signing on fees, benefits and bonuses. If you decide during the term of this agreement to deal with your own negotiations, we shall still be entitled to our fee as if we had conducted the negotiations on your behalf.

We will use our best endeavours to have our fee on any transfer or renegotiation paid by your employer. In so far as this is not possible, or the fee they pay us is less than our standard fees, then you will be responsible for our fees".

22. With the single exception of Spain's agreement with Violet, a common explicit feature of all the agreements, whatever form they take, is that the player appoints the agent to act exclusively on his behalf (in Spain's agreement with Violet the non-exclusive option had been chosen). As in the example we have just set out, the agent remains entitled to his fee even if the player negotiates an agreement himself. Similarly, it is a common feature that the agent binds himself to act only for the player in any negotiation involving that player, though it has to be said that in most of the examples we have seen, that obligation is rather less clearly set out. None of the agreements we saw precludes the agent from acting for other players or clubs in a general sense.
23. Few, if any, of the agreements we saw appear to have been drafted, or even reviewed, by a lawyer familiar with English contract law. We say that not by way of criticism but merely to point out the fact that the agreements — not only the standard form and the several variants of it but also the apparently independently prepared forms — leave a good deal to assumption. Despite that characteristic and the differences between the various forms used in practice, they have common themes, even if the manner in which they are spelt out varies in its precision and clarity: that the player binds himself to the agent exclusively for the term of the agreement (with the one exception we have mentioned), and that the agent will, so far as possible, ensure that his fees are met by the employer. Whether the term "the employer" is intended to include also third parties such as manufacturers whose products the player is to be remunerated for endorsing is unclear, but it is not a matter we need to decide. We do not regard it as an infringement of the requirement of the regulations that "[o]nly the client … may remunerate" the agent that the agent is expected to ensure that the payment is made by the employer (provided, as far as the law of the United Kingdom is concerned, any such payment is treated as an emolument of the employment), and it is apparent that, at least in the period with which we are concerned, the FA was aware of and took no steps to prevent the practice that agents arranged for the clubs rather than the players to pay their fees (the regulations now in force permit the practice provided the payment is treated as part of the player's remuneration). In any event, it is in our view far from clear that articles 12.3 and 12.4 of the FIFA Regulations prohibit the practice, although it is difficult to reconcile the two provisions.
24. One of Ms Brady's principal functions at the club was to arrange transfers. She did not, herself, select the players to be approached, or those with whose services BCFC wished to dispense, but received the requests and suggestions of the team manager and put those requests into the context of the budget she had previously agreed with the board. She had, it appears, considerable discretion within the budget, and did not need to seek prior approval of any deal she arranged, although she told us she kept the club chairman informed of the transactions she had in mind. The brevity of the transfer windows, it seems to us, made an arrangement of this kind unavoidable, and we have no doubt that Ms Brady had the experience and ability necessary for the task. In particular, we are satisfied that she was well aware of market conditions and of the value to the club of individual players, and capable without assistance from anyone else of putting together offers which would be attractive to a player and at the same time economically realistic from BCFC's point of view.
25. Her evidence was that transfer arrangements fell into three broad categories: those which she was able to, and did, negotiate herself, when no agent's fee was paid by BCFC; those which she did not wish to negotiate herself and in which she had an existing relationship of trust with the player's own agent such that she was willing to deal with him (all the agents involved in the transactions with which we are concerned were male) and pay the agent a fee; and those where she did not have a relationship of trust with the player's own agent and did not feel able to negotiate the transfer herself, when BCFC employed its own, separate agent. We are not concerned with the first of those categories, since no possible claim for input tax deduction arises, and we are not concerned with the third since the Commissioners accept that in those cases in which the club entered into discussions, using its own agent to negotiate with the player's agent, BCFC's agent was acting exclusively for the club. We shall say no more about the first and third categories, and will examine only the second.
26. Ms Brady also told us that, after a player whom BCFC wished to attract, or with whose services it wished to dispense, had been identified to her, she found out, if she did not already know, who was that player's agent. In some cases, the identity of the agent would be well known, but otherwise it could be ascertained from the Professional Footballers' Association or from the transferring club. Assuming the agent was one with whom Ms Brady had a relationship of trust, she approached the agent to act as an intermediary between the club and the player; she told us she never negotiated directly with a player, even a player already under contract to BCFC (although she seems to have broken that rule in one case to which we shall come). She rarely even met a player before the day on which he signed a contract of employment with BCFC.
27. In relation to transfers to the club, her evidence was, in brief, that she told the agent what terms the club was prepared to offer and agreed with the agent that he would undertake, if he could, to secure the player's services on those terms. If he was successful in doing so, the club would pay him a fee, but if he was unsuccessful it would pay him nothing. The fee was agreed in advance. Sometimes it was a single lump sum; on other occasions it was a fixed amount but paid in instalments; in others still the club agreed to pay a basic fee, with supplementary payments depending upon the player's or the club's performance within the duration of his contract. The terms and conditions offered to the players might be fairly complicated, including not only a salary but also bonuses depending upon appearances for the club in various competitions or success in scoring goals, and it would usually include some fringe benefits such as payment of the cost of temporary accommodation while a player required to move from one area of the country to another found a new home. In the case of a transfer from the club, Ms Brady's evidence was that the agent was instructed to persuade the player to agree that he should be placed on the transfer list (that is, become available for transfer to any other club which was interested in securing his services) or to agree to an early termination of his contract in some other way.
28. She also told us that, notwithstanding the agent's earlier relationship with the player, he agreed instead to represent the club, and exclusively the club, in the course of the transfer negotiations. His remuneration was dependent on success: in the event of his succeeding in persuading the player to accept the club's terms, he would be rewarded, but if he failed, no fee was due. Ms Brady looked to the agent, she told us, to represent the club's interests and to "deliver" the player (or, in the case of a transfer from the club, to persuade the player that it was in his interests to leave). She expected the agent to abandon his relationship with and loyalty to the player, for the duration of the negotiation, and had no misgivings about the player and the agent resuming their relationship after the negotiations were concluded. She did, however, expect and require the agents to represent the club and only the club while the negotiations were in progress.
29. We come now to describe, as briefly as possible, the transactions with which we are concerned. We set out the nature of the negotiation, relate the roles of the participants, describe Ms Brady's evidence and the documentation produced to us, and then add our conclusions about the relevant facts. At BCFC's request, we have used pseudonyms for the players (colours) and the agents (countries). We decided it would be wiser to do so in addition in relation to the transferring clubs, and we have used fruits as pseudonyms; and we make no mention of monetary amounts or precise dates. Ms Brady's evidence was rather vague in some cases (understandably, she could not recall all the details of every transaction) and, for the reasons we have given, the documentation was often very limited. Save to the very limited extent we mention, there was no evidence before us from any of the agents, and in no case did we have any evidence of any kind from the player.
30. It is, as we have indicated, accepted that BCFC has paid the agents' fees in respect of the transactions we describe below. In a few cases there was an indication, rather than clear evidence, that the player had made no payment to the agent in respect of the same transaction; in others, no indication at all. It was, however, tacitly assumed that the players had made no payments and in our view, for the reasons which will emerge, that assumption is correct.

The transactions

Transaction 1 — Player Red

31. Player Red joined BCFC from Club Apple. He was available for free transfer and there was, we were told, a good deal of competition for him. The only agent involved in the negotiation was England. England's invoice, addressed to BCFC, describes the sum due as "Being agreed fee for Transfer negotiations", without further elaboration. There was no prior written agreement between BCFC and England. Some three months before the transfer to BCFC took place, England wrote to BCFC giving details of an offer made to Red by Apple for the renewal of his contract, and which Red had turned down, and setting out his aspirations. The terms suggested include an agency fee; again, there is no indication of what would be provided (or to whom) in return for the agency fee.
32. The documentation provided to the FA following the conclusion of the negotiations showed that England acted as BCFC's agent, while no agent is shown to have represented Red. Among the documentation produced to us was a letter from England to Ms Brady which, in relation to Red, stated that "the player never actually signed a representation agreement with us, although we ultimately did the deal for [Red] to come to Birmingham City, the deal was very definitely done on behalf of Birmingham City and the club accordingly paid us". However, Mr Firth produced a letter a colleague, Robert Stevenson (who did not give evidence) had obtained from England in which, in relation to a number of players including Red, it said "Please note that [England] were acting on behalf of the players for all transactions incurred". Ms Brady said in her evidence that the author of that letter, England's financial controller, was not in a position to give such information about a transaction which had occurred some four years previously when, she believed, he was not employed by the company. She could not recall why BCFC had approached England in relation to that transaction but she accepted that it had probably been because England had been acting for Red in the past. Mr Hutton pointed out that the letter obtained by BCFC from England, while stating that Red had not signed a representation agreement, did not go so far as to state that England had not been representing Red.
33. It is difficult to understand why England should have written to BCFC in the terms of the letter sent three months before the transfer took place if it were not then representing Red. There was no evidence, from Ms Brady or elsewhere, to suggest that England had been asked to identify players who might be interested in joining BCFC at this time, or to approach Red in particular. The letter has the hallmarks of one written on behalf of a player who would soon be available for transfer seeking to secure for himself the best possible future contract. It could as easily have been sent to any club, or to several simultaneously. We are satisfied that, when the letter was written, there was a representation agreement in place between Red and England, even if it was not written. There is nothing before us to suggest that the representation agreement had expired or been rescinded before Red joined BCFC, and we are satisfied that England was Red's agent at that time.

Transaction 2 — Player Orange

34. Player Orange transferred to BCFC from Club Banana. The agent engaged was France whose invoice to BCFC recites that it is in respect of an "Agents fee in relation to the transfer of" Orange. In this case, it was necessary to make a payment to Banana, but there is no evidence before us to suggest that France played any part in negotiating the payment, and we can only assume that Ms Brady dealt with that part of the transaction herself. Mr Hutton relied on a fax from France to BCFC in which France sought confirmation of Orange's terms of employment (and France's fee) but which made no mention of the payment due to Banana. The letter was, he said, evidence that France was acting for Orange. We agree that the letter is consistent with its doing so, but are not persuaded we can read more into it than that; it is consistent with several possibilities. The documentation sent to the FA, signed by the player, shows that the only agent engaged was France and that it acted for the club.
35. However, the documentation claims that there was a written agreement in place between BCFC and France but none has been produced. It does not seem to us that any more reliance can be placed on the claim that France acted for BCFC than on the statement that there was a written agreement between them. Mr Stevenson had, moreover, obtained a letter from the agent which included the passage "With regard to the Birmingham City part of the transfer of [Orange] I acted as his agent and advised him with regard to the contract detail etc". We find that this letter reflects the truth, namely that France was representing Orange.

Transaction 3 — Player Pink

36. Player Pink joined BCFC in 1998, when a single agent, Italy, was involved. The transfer documentation sent to the FA, signed by the player, states that Italy acted only for the club. This transaction falls within the disputed period only because, on BCFC's promotion to the Premier League, the agent became entitled to a supplementary fee, which the club has paid. (We should add that the payment of fees to an agent in instalments appears to be permitted where the payer is a player, but not where it is a club: see articles 12.6 and 12.9 of the FIFA Regulations. Those provisions, too, lack clarity. Whether the payment of a supplementary fee on the occurrence of a contingency is permitted is not clear, but whether or not it is permitted we do not find it of any help in deciding whether the VAT payable on the fees is deductible by BCFC. Regardless of its permissibility, the FA seems to have taken no objection to the practice.)
37. There was an antecedent agreement between Italy and BCFC, which identified the circumstances in which fees would be payable to Italy by BCFC but did not identify the nature of Italy's obligations, nor make it clear whether BCFC or Pink was its client: the agreement merely provided (so far as is presently relevant) that "should [BCFC] be promoted to the Premier League while [Pink] is still with the club" an additional fee would become payable to Italy "for the services provided in these negotiations". The Respondents later obtained a letter from Italy whose author accepted that Italy had been the player's agent but added "As far as I am concerned, I acted on behalf of Birmingham City Football Club in securing the transfer of the registration of [Pink] under their instruction" and "Without the assistance given to Birmingham City Football Club this deal would not have transpired and it certainly would not have happened in the way that the club wanted".
38. We were provided with a copy of a judgment given in subsequent litigation between Pink and Italy in which Pink successfully sued Italy, asserting that the fee which BCFC had paid to Italy was a secret profit which Italy had earned in the course of representing Pink pursuant to a representation agreement into which Pink and Italy had entered in 1997. We should add, however, that in another action between Italy and a football club, Italy successfully sued for fees which the club had agreed to pay him if Italy was able to procure the transfer to the club of a number of players. The claim was heard by a Morland J, who expressly put to one side questions of whether Italy had acted in accordance with the rules and regulations governing the conduct of players' agents.
39. In this case we are satisfied, not least because of the judgment to which we have referred, that there was a representation agreement in place between Pink and Italy when Pink was transferred to BCFC.

Transaction 4 — Player Grey

40. In this case, player Grey transferred from Club Fig. The agent whose fees BCFC has paid was Portugal. As before, the transfer documentation sent to the FA, signed by the player, recorded that Portugal was the only agent involved and that it acted for the club. The further document completed by BCFC claimed, falsely as Ms Brady accepted, that there was a written agreement in effect between BCFC and Portugal. Portugal's first invoice to the club recorded that it was in respect of an "[a]greed fee for working on behalf of Birmingham City in the transfer" of Grey from Fig. The second invoice (there was again a supplementary fee payable when BCFC was promoted to the Premier League) merely referred to the transfer. Letters obtained by the Respondents from Portugal reveal that Portugal was aware that BCFC wished to obtain the services of Grey and Portugal "made it happen". The agent specifically stated that he had no representation agreement with Grey, but had shared the fees paid to him by BCFC equally with another agent, who did represent the player. The two agents had, it appears, worked together for a single fee, paid by BCFC — at least, there was nothing available to us to suggest that the player had paid anything.
41. Ms Brady told us she was particularly anxious to ensure that an agent acted for BCFC in this transaction since, for wholly personal reasons, she might otherwise have found herself with a conflict of interest. While it is understandable, even if reprehensible, that BCFC should represent falsely to the FA that it had a written agreement with Portugal, it is not so easy to understand why the transfer documentation should claim, also falsely, that only one agent was involved, when a statement of the truth, that each side had been represented by an agent, would have caused no difficulty or embarrassment. Nevertheless, and despite the inaccuracy of the documentation, we are satisfied that, in this instance, Portugal did represent BCFC and not the player. We shall return to the relevance, as we see it, of the sharing of the fee.

Transaction 5 — Player Scarlet

42. In this transaction, player Scarlet joined BCFC from Club Strawberry. There was again a single agent, Norway, whose invoice describes the services provided as "Acting as intermediary between clubs for transfer of [Scarlet] from [Strawberry] to Birmingham City". Norway's name is shown on the transfer documentation as the sole agent and acting for BCFC; the form has, again, been signed by the player. A fax sent by Norway to BCFC during the course of the negotiations set out the player's proposed contract conditions, including the agent's own fee. Mr Hutton argued that his doing so suggested that the payment of the fee was a term of the player's contract. We agree that such an interpretation is possible and, in correspondence between (say) solicitors, the most compelling interpretation. But in this context, we think it no more than an indication — and there are other, similar examples in the documentation we saw — of the agent's anxiety to ensure that the prompt payment of his fee was not overlooked.
43. In a letter subsequently obtained by the Respondents from Norway, Norway agreed that it had been Scarlet's players' agent but added the following:

"Subsequent to BCFC getting permission from [Strawberry] to approach the player, I was then contacted by BCFC as the player's named registered agent with FIFA. Their instructions were that if I could get [Strawberry] to accept their offer for the player and persuade [Scarlet] to accept the terms they were prepared to offer, then they would be prepared to pay my company a fee of £[X] plus VAT.

At the request of BCFC I helped negotiate the release of [Scarlet] from [Strawberry] at the transfer fee that they were prepared to pay. In addition to this BCFC informed me of the package they were willing to offer to the player and I put their offer forward to [Scarlet]. With regard to the work detailed above, I was acting on behalf of BCFC, and for the successful outcome of the transfer under the terms requested by BCFC my company was paid by them for the services so rendered. I can confirm that I did not receive any payment from the player, since the player would have acted on his own behalf in accepting the terms as offered."

44. In this case it seems clear that the agent negotiated both with the selling club and with the player. Although the player had an interest in securing his release from his existing club, since without that release he could not transfer to BCFC, we are satisfied from the terms of Norway's letter that it was BCFC which instigated the negotiations, that it made a conscious decision to engage Norway to act on its behalf and (despite the views which we express in a more general sense later in this decision) that is what Norway did. We are, therefore, persuaded that Norway provided a service to BCFC, in negotiating with Strawberry. We shall return later to our conclusions in relation to Norway's negotiating with the player. At this stage we merely record that it seems clear to us, and we so find, that there was a representation agreement in place between Norway and Scarlet.

Transaction 6 — Player Violet

45. In this transaction, player Violet transferred to BCFC from Club Raspberry. This was a more complicated transaction than most, in that another player was transferred from BCFC to Raspberry in part exchange. The documentation forwarded to the FA declared that while one agent, Spain, acted for BCFC, another agent acted for the player, although both Spain and the other agent are individuals employed by the same company. The Respondents obtained correspondence from the agency which confirmed those arrangements and also exhibited a copy of Violet's contract with the other agent, in the name of that agent rather than in the name of the employing agency. Although it might be regarded as undesirable, to put it no higher, to have two persons in common employment acting on opposite sides of the same transaction, it was not, at the time, prevented by the FA and we are satisfied that in this case that is what happened, and that Spain did provide a service to BCFC. However, the invoice which gave rise to the claim for input tax credit was sent by the employing agency, rather than the individual agency, to BCFC, and we had no evidence about the charging of a fee by the agency to Violet. It is, therefore, quite possible that the payment made by BCFC includes the cost of the service of representing the player. We shall return to that issue.

Transaction 7 — Player Camel

46. This too was an unusual transaction since the player, Camel, was an overseas player. He had previously played for Raspberry, but was available for free transfer. Ms Brady's evidence was that, in the case of overseas players, she invariably engaged an agent (in this case, Sweden) because it was necessary to obtain a work permit and agents had, but she did not have, the necessary knowledge and experience to arrange for a work permit to be obtained. The documentation produced to the FA claims that only one agent was involved and that it acted for the club. As in other cases, it is also falsely claimed that there was an antecedent written agreement between BCFC and the agent.
47. The Respondents had obtained from Sweden a copy of its representation agreement with Camel, which was in force at the time the negotiations took place. In addition, there is in the documentation a copy of a letter written by BCFC's team manager to Sweden which begins "I would ask you to consider" BCFC's offer to the player. In our view a letter written in such terms is consistent only with the agent's having represented the player rather than the club, and we are satisfied that that is the true position.

Transaction 8 — Player Caramel

48. This player was also available for transfer without payment of a fee to his former club and, we were told, there was strong competition for him. A single agent, Wales, acted and, again, the player signed the FA form showing that the agent acted for the club alone and that he did not engage an agent of his own. BCFC falsely claimed that there was a written agreement between it and the agent. The agent's invoice bears the words: "Fee for acting on behalf of Birmingham City FC on the acquisition of [Caramel].
49. Wales is a public company and its accounts are therefore published. In the report accompanying its accounts for the period ended less than a month before Caramel's transfer to BCFC, Wales claimed Caramel as a client (and made no claim that BCFC, or indeed any other football club, was or ever had been a client). We are satisfied from this evidence that at the time of his transfer to BCFC, Caramel was a client of Wales.

Transaction 9 — Player Fawn

50. Player Fawn joined BCFC from another club, Pear, to which a fee was paid. A single agent, Finland, acted in the transaction and it was claimed by the documentation sent to the FA, again signed by the player, that the agent acted exclusively for the club. Here, BCFC's manager wrote to the agent — this was apparently the first time it had committed its arrangement with an agent to writing — stating "I confirm the club will pay your fee of £[X] subject to [Fawn] signing with Birmingham City Football Club". Mr Stevenson, however, had obtained a further letter from Finland in which, after pointing out that the transaction had occurred some four years previously and that his recollection might consequently be faulty, he wrote:

"From my recollection, the preliminaries of a transfer deal had already been agreed by the two clubs prior to my involvement. I was then contacted to act as agent for the transfer, at which time it was agreed that Birmingham City would pay my fees for acting as agent. Attached is a copy of the letter I received from Birmingham City. My work as agent was essentially that of agreeing the transfer fee between the clubs and overseeing the terms of [Fawn's] contract with Birmingham City. While [Fawn] was at Birmingham, a further contract was agreed between him and the club without my involvement.

I have known [Fawn] since he played for [Blackcurrant] and have acted as his agent in transfers to [Pear], Birmingham and [Strawberry]."

51. There was a postscript to this transaction in the shape of Fawn's subsequent transfer from BCFC to Strawberry. Mr Stephenson obtained a letter from Strawberry in which it referred to Finland's involvement in that transaction. Strawberry also provided a copy of the form sent to the FA following that transaction (in which it was declared that Finland had acted for both the club and the player) as well as a copy of Strawberry's formal agreement with Finland. That agreement provides that while Strawberry will pay the entirety of Finland's fee, one half of the payment would be treated as a benefit in kind and would be entered accordingly on the player's P11D (the form by which benefits and payment in kind are notified to what was at the time the Inland Revenue) which might — in fact almost certainly would — lead to the player incurring a tax liability.
52. The evidence available to us points clearly to a long-term relationship between the player and the agent. Though the agent's recollection of detail might well be hazy, it is in our view unlikely, against that background, that he would have believed, incorrectly, that he had represented the player when in fact he represented the club. It is worth mentioning that in this case, perhaps more clearly than in others, not only would the agent have been in breach of his contract with the player if he acted exclusively for the club, but that, had the player in fact negotiated the terms of his employment himself, he too would have been in breach of his contract with the agent (the relevant terms are set out at paragraph 19 above) and would have been liable to pay a fee to the agent even though the agent had received a fee from BCFC for acting against the player's own interests. We are satisfied that the agent's letter reflects the reality, namely that he represented Fawn on his transfer to BCFC, and that the documents were produced in order to satisfy the requirements of clause 4.1 of the agreement between the agent and the player.

Transaction 10 — Player Magenta

53. Magenta was a BCFC player whose contract was nearing expiry. The club wished to retain him and Ms Brady attempted, she said, to negotiate a new contract with him. Unfortunately the player was initially resistant to the idea that he should stay with BCFC, and she decided instead to instruct an agent, England. Ultimately Magenta did agree to a new contract with BCFC, for three years with an option to continue for a fourth, and England was to be paid fees of an equal amount in each year for which the contract ran. Ms Brady's evidence was that she had instructed the agent to act for BCFC, he had done so, and the club had paid for that service.
54. However, England already had a representation contract (in the FIFA standard form) with Magenta, in effect at the time of the negotiations. His first invoice, directed to BCFC, contains only the description "First part of agreed fee", without elaboration. We were shown a written agreement between BCFC and England, but it is dated five weeks later than the date on which, according to the FA documentation, Magenta signed his new contract with BCFC. The FA documentation was originally completed so as to show that England acted for Magenta, but then altered to show that he had acted for the club. Then a second form was prepared and submitted, declaring that England had indeed acted for the player, while a separate form declared that BCFC had not used an agent. Ms Brady produced a letter from England in which, having accepted that there was a representation agreement with Magenta in effect, he added "[Magenta] ultimately ended up resigning [sic] for Birmingham and the club paid us to help secure that arrangement". However, an undated letter from England to Ms Brady, written apparently about 18 months later, in response to an approach made by Ms Brady directly to Magenta (contrary to what she told us was her practice), pointed out that England was his agent, and asked that any further approach be made via England.
55. We are satisfied from this evidence that England represented Magenta in the renegotiation of his contract with BCFC, and did not represent the club. We are not persuaded that "the club paid us to help secure that arrangement" reflects the reality.

Transaction 11 — Player Navy Blue

56. In this case, Navy Blue joined BCFC from another club, Quince. We were shown an undated agreement between BCFC and the agent, Wales, in which appear the words:

"In consideration for you working on behalf of Birmingham City Football Club in the transfer of the above player from [Quince], Birmingham City FC agrees to the following [there are then set out various fees and conditional fees]".

57. The documentation sent to the FA declared that Wales acted exclusively for the club. Ms Brady told us that she had engaged an agent because she was not acquainted with the management at Quince, and did not feel confident negotiating with the club herself, yet she also mentioned, without identifying him, that Quince had its own agent. There was, however, no documentation available to us relating to the negotiations with Quince, to support the proposition that Wales had been instrumental in securing terms for Navy Blue's release acceptable to BCFC — Wales' invoice merely records that it is "in respect of our agreement" — and we were left with nothing more than Ms Brady's rather vague recollection. Mr Stephenson had not obtained any further information from Wales, but Ms Brady agreed when she gave evidence that Wales had been Navy Blue's agent. We are satisfied that he was.

Transaction 12 — Player Cream

58. Cream transferred to BCFC from another club, Peach. A single agent, Switzerland, was declared by the documentation sent to the FA to have acted for the club. There was an undated agreement between BCFC and the agent, in materially the same terms as those used between BCFC and Wales in connection with transaction 11 (both forms of agreement were prepared by BCFC). Ms Brady's evidence about this transaction was even more vague than that she gave about transaction 11, but she accepted that Switzerland had probably been Cream's agent beforehand. The invoice is said to be for "professional services as agreed between [Switzerland] and Karren Brady". Ms Brady was unable to tell us what Switzerland had done, beyond saying that his role was to secure Cream's services. There was a subsequent query by Switzerland about his fee, and we were shown an internal BCFC memorandum in which he is referred to as Cream's agent. We are satisfied that he was.

Transaction 13 — Player Black

59. The agent in this case, Scotland, is a solicitor (albeit trading through the medium of a company) and not a registered players' agent. His invoice describes his charge as a "finder's fee". The relevant transaction was the transfer of Black from Strawberry. The documentation sent to the FA shows that Scotland acted exclusively for the club. There was, however, no written agreement between BCFC and Scotland — a fact which, had there truly been an agreement between Scotland and BCFC, we should have found surprising, both because Scotland is a solicitor and because the fee was very large. Mr Stevenson corresponded with Scotland, and obtained from him a letter in which he explained that he was Black's representative, that Black had fallen out with his existing club, Strawberry, and was keen to transfer, and that Strawberry was willing to consider offers. Scotland made an approach to BCFC and later attended meetings with BCFC in which terms for the transfer were agreed, including a provision that BCFC would pay "a Finder's Fee for acting in introducing the client to the Club". Scotland's letter is quite inconsistent with the proposition that he did anything for BCFC, and we are satisfied that, throughout, Scotland's client was Black.

Transaction 14 — Player Lemon

60. Lemon was transferred temporarily, on loan, from his club, Apricot, to BCFC. The agent involved in the loan was England. There was an agreement between BCFC and England which refers to England's "acting on behalf of Birmingham City Football Club". We were told by Ms Brady that there was a good deal of competition for the services of Lemon and that it was also necessary to persuade Apricot to agree to different terms than those it had originally proposed. She had, she said, engaged an agent because of the competition, and because she had no relationship of her own with Apricot, and did not feel able to negotiate acceptable terms herself. We had no evidence about any relationship between Lemon and England before or after the loan took place, but we accept Ms Brady's evidence (which was in any event not challenged) that there is little or no personal benefit for a player in a loan, and that the primary negotiation is between the clubs. We are satisfied in this case that England did act for BCFC.

The parties' arguments

61. The Appellant's case, in short, is that in each of the transactions we have described, and notwithstanding his existing agreement with the player, the agent acted for the club. Its primary case is that, as Ms Brady had demanded, the agent provided to the club the service of "delivering" the player (or procuring his agreement that he leave or agree to new terms) and that the payment made to the agent by the club was for that service, and that service alone. Its alternative argument is that the agent represented both player and club, but nevertheless rendered a service to the club for which the payment made was the consideration. The Respondents argue that the express provision of some of the agreements between the players and the agents, that the agent will endeavour to ensure that the employer pays his fees, reflected the reality in every case: the agent acted for the player, but it was a universal, or almost universal, fact that the players expected the clubs to meet their agents' fees, the clubs knew that they could secure the players only if they did so, and the claim in the documentation sent to the FA was no more than window-dressing, designed to enable the clubs to recover the VAT they had paid, and to avoid the need to declare the payment as a benefit in kind received by the player on which he would become liable to pay income tax.
62. Before dealing with those arguments in detail, we think we should make a few preliminary observations. We have already indicated that we are satisfied that the FIFA and FA rules were observed somewhat casually, and in some respects hardly at all, and we should add that we are satisfied (partly from the evidence we heard and partly from the Quest report) that BCFC was by no means the only club whose respect for the rules was less than strict. The information gathered by Mr Firth, which we have already mentioned, showed that the practice by which agents represented players but collected their fees from the clubs was commonplace. We consider that evidence is reliable, and it was not challenged. It is consistent with the express term of some of the agreements that the agent would use his best endeavours to secure payment of his fees from the employing club; and the reason given for it, that any player would prefer to have his agent's fees paid by his employer than have to find the money himself, makes sense, even if the player should recognise that the practice might tempt the agent to persuade the player to join the club which offers the largest fee, regardless of the player's own interests.
63. It can safely be said that it is not possible to take the documentary evidence produced by BCFC at face value. As we have already mentioned, BCFC was prepared to assert to the FA that it had a written agreement with an agent when that was plainly not the case — had there been a written agreement it would have been simplicity itself to produce it, yet, in relation to the earlier transactions, we were not even told that there had been one but it had been mislaid. There is, we have concluded, no reason to believe that other assertions made to the FA were any more truthful. Certainly we do not consider that the claim made in the post-transfer documents sent to the FA that the agents had acted only for the club is evidence of the truth of that claim. We have concluded that no reliance can be placed on those declarations, despite their having been signed by the players. We have no evidence of what the players were told before they signed the forms, nor of whether they read them or merely signed what was put in front of them. We bear in mind, in reaching that conclusion, that the forms were signed on the day on which a transfer was announced, an event which (as the documents produced to us amply showed) was of great interest to the press, and when the player's mind would almost certainly not be directed to the accuracy of forms. We have also commented already on the superficial — indeed ineffectual — supervision of transfer negotiations practised by the FA at the time.
64. The agents of whose dealings we had evidence, too, did not adhere scrupulously to the rules. It is apparent from what has gone before that not all agents used the FIFA standard form representation agreement or even an adaptation of it, although most of the agreements we saw, whatever their form, did reflect some at least of the requirements and, in reasonable measure, the spirit of the FIFA regulations. We had no evidence that the agreements were registered, as the FIFA Regulations required, though there was no evidence to the contrary. BCFC did not have written agreements with the agents it engaged (or believed it had engaged) in the earlier stages, and even when it did have written agreements with them, they were not in the FIFA form (or even a close approximation) and were not registered. Although we can accept that the short time-scale within which transfer negotiations are conducted makes the preparation of detailed written agreements difficult, and we accept too Ms Brady's evidence that the industry relies on trust, we were surprised to note that no documentation at all was produced to support the contention that there were agreements between BCFC and the agents, save for the rudimentary agreements produced in the later part of the period with which we are concerned. We should have expected to see notes of telephone calls, internal memoranda and the like.
65. It is not surprising that many (though not all) clubs and agents were somewhat casual in their approach to the rules, when the chances of being penalised for non-compliance were negligible, if not non-existent. We do not, therefore, regard the requirements of the FIFA and FA rules as determinative. Nevertheless, there was a framework of rules in effect. The evidence indicated to us that the agents and clubs were conscious of it, and in the agents' case of the Code of Conduct too, and that in a general if not formal sense they did seek to respect the spirit of the rules. Indeed, Ms Brady's own evidence was to the effect that she respected the agents' need to comply with the rules and avoided making demands which would put the agents in breach of them. The presumption must be that, in the absence of clear evidence to the contrary, the agents complied with the spirit if not the letter of the FIFA Regulations and the Code of Conduct.
66. We accept that the analysis of a supply for VAT purposes is not dictated by the terms of the contract's definition of the parties' obligations: Customs and Excise Commissioners v Reed Personnel Services Ltd [1995] STC 588, a proposition which must be all the stronger if those obligations are not spelt out clearly, and that the contractual analysis and the VAT analysis may not be identical. We accept too that the analysis is not affected by considerations of lawfulness, nor by the fact that one contracting party may have broken his contract with a third party. In that we intend to adopt the same course as Morland J in the action to which we referred in connection with transaction 3 above.
67. We can dispose quickly of transaction 14, in which we have found that the agent provided a service to BCFC. We see no reason to infer that, in addition, he provided a separate, discrete service to the player for which there was severable consideration and we conclude therefore that BCFC is entitled to credit for the VAT included in the agent's fee. We will deal with transaction 5, in which we have found that the agent acted for the player and BCFC, and transactions 4 and 6, where the payment represented (or we infer it represented) also the consideration for a separate supply to the player later.
68. In those cases in which we have found that the agent had a representation agreement with the player, Miss Whipple must persuade us, for her primary argument, that the agent abandoned that agreement and instead represented the club, for the duration of the negotiations, and thereafter resumed representation of the player. BCFC's contention is that the agent was approached in order that he could represent the club in persuading the player to join BCFC (or, in one case, transaction 10, agree to stay). Typically, according to Ms Brady's evidence, the agent was given a package offer — to include the player's salary, bonuses and fringe benefits and the duration of the contract desired by BCFC — and, in Ms Brady's words, told to "sell it" to the player. We have no doubt, as we have indicated, that she believed that BCFC was indeed paying the agent for "delivery" of the deal she wanted. As her demeanour when she gave her evidence made clear, Ms Brady is a formidable woman who knows her own mind, and is determined to succeed in achieving her objectives. We do not doubt that she expected the agents to assist her in that goal, and believed that they were doing so. As we have indicated, however, the question is not what Ms Brady wanted or believed, but what in fact happened.
69. The most obvious difficulty in BCFC's way is that it depends on our being satisfied that the agents did in fact abandon their player clients, in order to represent the club in a transfer negotiation. We are not so satisfied. We should hesitate to make findings that agents have breached the FIFA Regulations and their agreements with their clients, in such a fundamental manner, without first hearing them; but, save in the case of Norway, in relation to transaction 5, the evidence available to us does not support the proposition that any of them did so. Although some of the agents have indicated, in their letters to BCFC or to Mr Stevenson, that they "made a transfer happen" or "assisted BCFC", not one, with that exception, has said that he ceased to represent his player client. It was clear that in some cases the players had been represented by the same agent for several years. In others the relationship was of a shorter duration. But in either case, it is in our view impossible to believe that a player who had engaged an agent to act on his behalf in the negotiation of his terms of employment with a club would, knowingly and willingly, accept that the agent should abandon that role and instead represent the club, quite possibly against his (the player's) interests. No player, having engaged an agent for the primary and express purpose of representing him in that context would agree, instead, to release the agent temporarily and, without engaging another agent to represent him, undertake the task himself. We had no evidence from any player that he had done so — and we should have found it remarkable if he had.
70. Moreover, Ms Brady's own evidence is not consistent with the notion that the agent was representing only BCFC. In her first statement appears the comment "I find that most players are just not interested in the minutiae of the negotiations and prefer to leave this to the agent to deal with"; in her second she said "In my experience, players tend to leave the decision about which club they join and what wages they earn to their agent." That evidence is wholly inconsistent with the proposition that the players agreed that their agents should represent the club and leave them to their own devices. Ms Brady accepted that she did not know, and had no means of finding out, what the agent BCFC had supposedly engaged was saying to the player. That concession, too, is quite inconsistent with the proposition that the agent was the club's representative: a principal should always have some measure of control over his agent, whereas here there was none. We are satisfied that the statements in the documents produced to the FA that the agents who had representation agreements with the players instead represented BCFC are untrue.
71. We observe also that payment was to be made only if the agent "delivered" the player, and not for the task of undertaking negotiations which might or might not succeed. There was no mechanism in place to ensure that the agent was representing only the interests of BCFC, and not collecting offers from several clubs, in order that the player could accept the most attractive of them (and when the agent would collect his fee from the club the player chose to join). But the evidence is consistent with the conclusion that that is exactly what happened: the agent found out what offers were available, and discussed them with the player who (if necessary after renegotiation) accepted the one he found the most attractive. It was understood between agent and player and, as we have recorded, in many cases the player's agreement with the agent expressly so provided, that the acquiring club was expected to pay the agent's fee. We have no doubt that the requirement was known by the clubs and, however reluctantly, accepted by them. It is for that reason that we have made the assumption that in none of the relevant cases did the player make any payment to the agent.
72. The reality, in our view, is that Ms Brady determined (and usually after ascertaining from the agent the terms of the player's current engagement and his aspirations) what BCFC was willing to pay, put the proposition to the agent, and undertook to pay him a fee if the player decided to accept her (rather than any other) offer. She did not give an agent a negotiating authority, leaving him to secure the best arrangement within that authority. If the player was unwilling to accept what she had offered, but put forward a counter-offer, she might agree to that counter-offer, or amend her own offer; but we have no real doubt that it was Ms Brady who was negotiating on BCFC's behalf. If one has to decide whether the agents represented exclusively the player or BCFC in each of the relevant transactions, the only realistic conclusion is that Ms Brady represented BCFC and the agents continued to represent the players.
73. Miss Whipple's subsidiary argument was that the agents "faced both ways" — by which we understood her to mean that they alternated between representing the player and representing BCFC, or represented both simultaneously, effectively acting as an intermediary, bringing them together. We reject the first limb of that argument: for the reasons we have already given we are satisfied that agents already in contract with a player did not abandon the player, even temporarily, in favour of BCFC, but continued to represent the player throughout. The second limb of the argument cannot, however, be so easily disposed of.
74. In Commissioners of Customs and Excise v Redrow Group plc [1999] STC 161 the taxpayer, a house builder, offered to prospective purchasers of its houses a scheme by which it would pay the fees of the estate agents who sold the prospective purchasers' existing homes. The taxpayer had a substantial measure of control over the agents' discretion, to the extent that it could override the prospective purchasers' own instructions, and it paid the fees only if the prospective purchasers in fact purchased one of its houses. It was successful in its claim to recover as input tax the VAT added to the agents' fees which it had paid. At p 165 Lord Hope said "The critical question is whether the expenditure was incurred in the supply by the estate agents of services to Redrow". At p 166 he added:

"Clearly the estate agents were supplying services to prospective purchasers, as they were engaged in the marketing and sale of the existing homes which belonged to the prospective purchasers and not to Redrow. But Redrow was prepared to undertake to pay for these services in order to facilitate the sale of its homes to the prospective purchasers. The estate agents received their instructions from Redrow and, so long as the prospective purchasers completed with Redrow, it was Redrow who paid for the services which were supplied. I do not see how the transactions between Redrow and the estate agents can be described other than as the supply of services for a consideration to Redrow. The agents were doing what Redrow instructed them to do, for which they charged a fee which was paid by Redrow.

The word 'services' is given such a wide meaning for the purposes of VAT that it is capable of embracing everything which a taxable person does in the course or furtherance of a business carried on by him which is done for a consideration. The name or description which one might apply to the service is immaterial, because the concept does not call for that kind of analysis. The service is that which is done in return for the consideration. As one moves down the chain of supply, each taxable person receives a service when another taxable person does something for him in the course or furtherance of a business carried on by that other person for which he takes a consideration in return. Questions such as who benefits from the service or who is the consumer of it are not helpful. The answers are likely to differ according to the interest which various people may have in the transaction. The matter has to be looked at from the standpoint of the person who is claiming the deduction by way of input tax. Was something being done for him for which, in the course or furtherance of a business carried on by him, he has had to pay a consideration which has attracted VAT? The fact that someone else, in this case, the prospective purchaser, also received a service as part of the same transaction does not deprive the person who instructed the service and who has had to pay for it of the benefit of the deduction."

75. At p 172 Lord Millett added the well-known observation:

"… one should start with the taxpayer's claim to deduct tax. He must identify the payment of which the tax to be deducted formed part; if the goods or services are to be paid for by someone else he has no claim to deduction. Once the taxpayer has identified the payment the question to be asked is: did he obtain anything — anything at all — used or to be used for the purposes of his business in return for that payment?"

76. Miss Whipple referred us also to Customs and Excise Commissioners v Plantiflor Ltd [2002] STC 1132 and WHA Ltd v Customs and Excise Commissioners [2004] STC 1081 in which the principles expounded in Redrow were endorsed in different contexts, and we accept that the principles are of wide application. Miss Whipple's argument was that BCFC obtained something in return for the payment, namely the services of a player it wanted. The agent had provided that something, by persuading the player to join BCFC, and had correspondingly rendered a service to BCFC for which the fee was the consideration. It did not matter if, at the same time, the agent had represented the player since, just as in Redrow and WHA, the fact that a service had been rendered to two recipients did not undermine the deductibility of the VAT in the hands of the payer.
77. While we recognise the wide application of the Redrow principles, there is nevertheless a limit to their range: they cannot be extended so as to make deductible the VAT included in any payment made by a taxable person, however tenuous the connection between the supply and his business purposes, nor when he has not received anything which can be identified as a supply. What Redrow shows is that provided the payer claiming the right to deduct can show that he has received some supply for which the payment is the consideration, it is immaterial that someone else may also have derived a benefit. Redrow does not undermine the fundamental principle that the payer must be the recipient of a supply of something to be used for his business of making taxable supplies if he is to acquire the right to deduct. "Supply" is not synonymous with "benefit" or "advantage", but has an autonomous, Community meaning, implying a reciprocal obligation, on the one hand to provide goods or a service, and on the other to make a payment: see Tolsma v Inspecteur der Omzetbelasting Leeuwarden (Case C-16/93) [1994] STC 509. In those cases in which we have found that the agent had a representation agreement with the player (save for transaction 5, to which we shall return) we do not find the necessary reciprocity between BCFC and the agent. If we are right in our conclusion that the agent continued to represent the player (who, it should not be forgotten, had a contrary interest to BCFC, unlike Redrow and the prospective purchasers), the only analysis which withstands scrutiny is that BCFC agreed to discharge the player's obligation to pay the agent's fee, as part of the price it was required to pay for securing the player's services.
78. It is true that Ms Brady agreed the amount of the fee with the agent and that she also agreed with the agent that, provided the player joined BCFC, the fee would be paid. Miss Whipple claimed that the agreement of the amount of the fee was reached without reference to the player. We had no evidence one way or the other on that point, but even if she is right it does not seem to us to be a point of significance. The agent no doubt secured the largest fee possible, and may have negotiated the amount without any regard to his agreement with the player. The fact is, however, that the fee was paid and accepted in discharge of the player's obligation to remunerate the agent, even if, had the player actually made a payment, the amount might have been different. In our judgment Ms Brady agreed to pay the fee as part of the player's package, in accordance with what we find to be the common practice, and not as BCFC's part of a reciprocal arrangement with the agent, in return for the "delivery" of the player. We are not persuaded that the agent was under any obligation to deliver the player, or even to attempt to do so. As we have said, there was no restriction — or even any purported restriction — on his offering the player's services to several clubs. It was no more than an understanding that the successful club would pay the agent's fee, because the player expected it.
79. In respect of transactions 1, 2, 3, 7, 8, 9, 10, 11, 12 and 13 we conclude that no service was rendered to BCFC, which merely discharged the agent's fee on the player's behalf, and that deduction of the input tax is not permissible.
80. We have found, in relation to transactions 4 and 6, that BCFC made a payment to an agent who did provide a service to BCFC, but who shared his fee with the player's own, separate agent. We did not hear argument about the consequences of such a finding — that is, whether the entire fee was paid for the service to BCFC, the agent's decision to share it with a colleague being an entirely separate mater, nor whether in reality BCFC discharged two separate obligations, its own to the agent who represented its own interests, and the player's obligation to his agent upon the basis that the player would not have agreed to the terms which were offered had he been required to pay an agent's fee himself. In the absence of such argument we have come to the conclusion that we should not look behind the agreement between BCFC and its own agent. In these cases the agent was required to "deliver" the player in return for the fee. He did so; he had no separate obligation to the player. If, in order to satisfy his agreement with BCFC, he found it necessary to incur expense for which he was not separately reimbursed, he was, in our view, discharging a liability of his own. We see no difference in principle between the payment of a sum to another agent and routine expenses such as the cost of travelling. We therefore allow the appeal so far as transactions 4 and 6 are concerned.
81. The fee paid by BCFC in respect of transaction 5 was the consideration for the negotiation with the selling club, and for the negotiation with the player. So far as we are aware, no attempt has been made to apportion the fee between the two services, and we have no evidence on which we might attempt the task ourselves. As in the other cases where the agent was already the player's representative, we do not accept that he instead represented BCFC in the negotiations with the player, although we do accept that he represented BCFC in the negotiation with the selling club. It is, of course, true that the player also benefited from that negotiation, but in our view his position in that respect is similar to that of the prospective purchasers in Redrow. We are satisfied that, in the negotiation with the club, BCFC gave the instructions and was the recipient of the supply for which it paid; but to the extent that the fee is attributable to the agent's service of representing the player, it does not represent the consideration for a supply to BCFC and the VAT on it is not deductible in BCFC's hands. In the absence of evidence the only apportionment we can make is to divide the fee equally between the two components and, unless the parties agree otherwise or we should so determine after further argument, we allow the appeal to the extent of the VAT on one half of the fee.

Conclusions

82. We are satisfied that in relation to transactions 4, 6 and 14 above, the agent did represent BCFC and not the player, and that BCFC correctly claimed credit for the VAT charged on the fee. In transaction 5, we have found that the agent did represent BCFC in the negotiation with the selling club and, notwithstanding the incidental benefit to the player of securing his release, we are satisfied that so much of the fee as is attributable to that negotiation represents the consideration for a service rendered to BCFC. For the reasons we have given, we do not accept that the agent provided a service to BCFC in the context of the negotiation of the player's terms, and the VAT charged on so much of the fee as is attributable to that part of the transaction is not deductible. In all the other cases we have concluded that credit is not due, and the assessments, or the relevant parts of them, are correct. We should add for completeness that, even if we had accepted Miss Whipple's subsidiary argument in principle, we should not have done so in relation to transactions 7, 9, 10 and 13 since the evidence clearly showed that the agent represented the player alone, did not consider, even in the broadest sense, that he was providing any service to BCFC, and did not in fact provide any such service.
83. The appeal is allowed to that extent, and to the extent that it has been conceded as it has proceeded. Both parties asked for directions in their favour in respect of costs should they succeed, but we were not specifically addressed on the appropriate direction in the event of partial success. There were additional complications in that, at the outset of the hearing, the Respondents sought a postponement (which we refused) because they had, they said, been prejudiced by the manner in which the Appellant had put and then changed its case; and because, Miss Whipple argued, this case did not fall within one of those categories which were excepted from the general rule that the Respondents would not seek costs from an unsuccessful appellant. Against that background, and on a very rough and ready basis, we have concluded that the Appellant should have one quarter of its costs of the appeal, to be the subject of detailed assessment by a costs judge of the High Court, if they cannot be agreed. We make no specific direction in relation to the postponement application, but include it in the general direction we have made, and we make no finding, as it is unnecessary to do so, about whether this is one of the exceptional cases in which the Respondents may properly seek a direction in their favour. We give permission to both parties to apply, within two months of the release of this decision, for the hearing to be continued for the determination of any point on which we have made assumptions in the absence of evidence or argument.

COLIN BISHOPP

CHAIRMAN
Release Date: 2 May 2007

MAN/04/0540