Keith Murphy v The Commissioners for HM Revenue and Customs [2021] UKUT 0152 (TCC)

JurisdictionUK Non-devolved
JudgeMr Justice Michael Green,Judge Ashley Greenbank
Neutral Citation[2021] UKUT 0152 (TCC)
Subject Matter29 June 2021
CourtUpper Tribunal (Tax and Chancery Chamber)
Published date30 June 2021
[2021] UKUT 0152 (TCC)
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
Appeal number: UT/2020/0093
BETWEEN
KEITH MURPHY
Appellant
-and-
Respondents
TRIBUNAL:
MR JUSTICE MICHAEL GREEN
JUDGE ASHLEY GREENBANK
Sitting in public by way of remote video hearing treated as taking place at The Royal
Courts of Justice, Rolls Building, Fetter Lane, London on 26 March 2021
Michael Collins, counsel, instructed by Fraser White, Chartered Accountants, for the
Appellant
Joshua Carey, counsel, instructed by the General Counsel and Solicitor to HM Revenue
and Customs, for the Respondents
INCOME TAX treatment of payments made to settle dispute between police service and
police officers regarding overtime and allowances settlement agreement payments in
respect of legal fees and insurance meaning of “profit” in s62(2)(b) Income Tax
(Employment and Pensions) Act 2003 appeal allowed
1
DECISION
INTRODUCTION
1. This is an appeal by Mr Keith Murphy from a decision of the First-tier Tribunal (Judge
Guy Brannan) (the “FTT”) released on 11 November 2020 (the “FTT Decision”). The
respondents are the Commissioners for Her Majesty’s Revenue and Customs (“HMRC”).
2. Mr Murphy was a police officer with the Metropolitan Police Service (the “Met”). The
matter before the FTT concerned the tax treatment of certain payments made by the Met for
the account of Mr Murphy and a number of other police officers pursuant to a settlement
agreement in respect of claims brought by the officers for alleged unpaid overtime and other
allowances. The disputed payments related to certain legal expenses and the costs of insurance
against liabilities to pay the legal costs of the Met if the claim were to be unsuccessful.
3. The FTT decided that Mr Murphy was subject to income tax on the amounts received
from the Met pursuant to the settlement agreement that were applied to make the disputed
payments. This was on the basis that such amounts were employment income. Mr Murphy now
appeals to this Tribunal with the permission of the FTT.
RELEVANT LEGISLATION
4. It will assist our explanation if we first set out the legislative background to this appeal.
5. The charge to income tax on employment income is contained in s6 of the Income Tax
(Earnings and Pensions) Act 2003 (“ITEPA”). It provides, so far as relevant:
6 Nature of charge to tax on employment income
(1) The charge to tax on employment income under this Part is a charge to tax
on
(a) general earnings, and
(b) specific employment income.
The meaning of “employment income”, “general earnings” and “specific
employment income” is given in section 7.
(2) The amount of general earnings or specific employment income which is
charged to tax in a particular tax year is set out in section 9.
6. Section 6 ITEPA therefore charges income tax on “general earnings” and “specific
employment income”. The concept of “specific employment income” encompasses amounts
which count as employment income under certain specific regimes, such as the rules relating
to securities and securities options and the disguised remuneration rules. It is not relevant for
present purposes.
7. The definitions of “employment income” and “general earnings” are found in s7 ITEPA.
It provides as follows:
7 Meaning of employment income, general earnings and specific
employment income
(1) This section gives the meaning for the purposes of the Tax Acts of
“employment income", general earnings and specific employment
income”.
(2) “Employment income” means—
(a) earnings within Chapter 1 of Part 3,

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