Hill
| Jurisdiction | UK Non-devolved |
| Judgment Date | 19 June 2015 |
| Date | 19 June 2015 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Tony Beare, Mr Michael Sharp FCA
The Appellant appeared in person
Mr John Corbett, Officer of HM Revenue and Customs, appeared for the Respondents
Income tax Earnings from employment Compensation for departure from the terms of a contract of employment following a TUPE transfer Whether payment earnings from employment Yes.
[1] This is an appeal made by Mr Andrew Hill (Mr Hill) against an amendment made by Her Majesty's Revenue and Customs (HMRC) on 2 January 2014 to his self assessment tax return. The appeal relates to the treatment for income tax purposes of the sum of 30,000 which Mr Hill received under the terms of a compromise agreement entered into in October and November 2010 between Mr Hill, Saab City Limited (Saab City), General Motors UK Limited (GM) and Saab GB Limited (Saab GB).
[2] Pursuant to the amendment to Mr Hill's self-assessment tax return, HMRC have assessed Mr Hill to income tax in respect of the 30,000 so received on the basis that it falls within the definition of earnings in Part 3 Income Tax (Earnings and Pensions) Act 2003 (ITEPA). Mr Hill contends that the relevant amendment is misconceived because the sum in question falls within the terms of Chapter 3 of Part 6 ITEPA (which covers, inter alia, sums paid on the termination of employment) and is therefore exempt from income tax because it does not exceed the threshold of 30,000 in sub-section 403(1) ITEPA.
[3] Subject to one point which we mention below, there is no dispute between the parties as to the relevant facts in this case.
[4] Mr Hill worked for GM from 1 December 2001 until 1 June 2010. His employment contract included a provision stipulating that he was to be located at Griffin House, Osborne Road, Bedfordshire but that he might be required to work at other sites within a 10 mile radius of Griffin House. On 1 January 2007, Mr Hill was seconded to Saab City in London, a secondment which continued until 1 June 2010. On that date, Mr Hill's employment transferred from GM to Saab City under the Transfer of Undertakings Regulations 2006 (the TUPE Regulations).
[5] Mr Hill was unhappy with the transfer of his employment to Saab City. He had been hoping to return to GM at the end of his secondment and to continue his career with GM. In particular, he was not happy about the prospect of continuing to work in London, which was a long way from home, and about the fact that GM had failed to consult with him in advance of the transfer as required by the TUPE Regulations. Accordingly, he raised a grievance with GM and Saab City about this and, after a protracted period of negotiation, a compromise agreement involving Mr Hill, both employers and Saab GB was executed over the period between 21 October 2010 and 11 November 2010.
[6] The compromise agreement is not a model of clarity. For example, there are repeated references to the Employer but that term is not defined and the implication is that all three of GM, Saab City and Saab GB are intended to fall within the definition. The key terms of the compromise agreement are paragraphs 5 to 7, which between them stipulate that Mr Hill will receive 15,000 from each of Saab City and GM and that this is to be in full and final settlement of all and any claims or rights of action that Mr Hill has or may have against either of them or any related company.
[7] Paragraph 6 enumerates certain specific complaints which Mr Hill is expressly agreeing to forgo by virtue of entering into the agreement but both Mr Hill and HMRC agree that this is largely formulaic and that the predominant reason for the payment was the fact that Mr Hill was now being required to work in London despite the term in his contract stipulating that he should be required to work no further than 10 miles from Griffin House.
[8] We think that it is important to note two points in this context. First, Mr Hill had been paid a travel allowance during the course of his secondment to Saab City and this travel allowance continued following the transfer under the TUPE Regulations. Secondly, Mr Hill had not raised a grievance with GM about the fact that he was being required to work more than 10 miles from Griffin House during the terms of his secondment. He raised his grievance following the transfer under the TUPE Regulations.
[9] Mr Hill contends that another reason for the payments was that GM had failed to comply with its obligation under the TUPE Regulations to...
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