The Commissioners for HM Revenue and Customs v Tottenham Hotspur Limited
| Jurisdiction | UK Non-devolved |
| Judge | Sir Geoffrey Vos,Chancellor |
| Neutral Citation | [2017] UKUT 0453 (TCC),[2017] UKUT 0453 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Date | 24 November 2017 |
| Subject Matter | Tax,24 November 2017 |
| Published date | 24 November 2017 |
[2017] UKUT 0453 (TCC)
Appeal number: UT/2016/0157
INCOME TAX – termination payments made to football player employees – 5 whether taxable as earnings “from an employment” under sections 9(2) and 62 of
the Income Tax (Earnings and Pensions) Act 2003 – whether subject to national
insurance contributions under section 6 of the Social Security Contributions and
Benefits Act 1992 – whether the FTT was right to hold that the distinction was
between “receipt of remuneration or profits in respect of office” (taxable under 10 section 9(2)), and “sums paid in consideration of the surrender by the recipient of
rights in respect of the office” (not so taxable) – that distinction upheld and
described as being between cases where the entire contract of employment is
abrogated in exchange for the termination payment (as in Henley v. Murray [1950]
1 All ER 908), and cases where the payment is made in pursuance of a pre-existing 15 obligation to make such a payment arising under a contract of employment.
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER 20
BETWEEN
THE COMMISSIONERS FOR HER
MAJESTY’S REVENUE AND CUSTOMS 25 Appellants
and
TOTTENHAM HOTSPUR LIMITED Respondent
30 TRIBUNAL: Sir Geoffrey Vos, Chancellor of the High Court
and Upper Tribunal Judge Tim Herrington
Sitting at the Royal Courts of Justice, Rolls Building, on 8th November 2017
35 Ms Aparna Nathan (instructed by the General Counsel and Solicitor to HM
Revenue and Customs) for the Appellants, HMRC
Mr Jolyon Maugham QC and Ms Georgia Hicks (instructed by Deloitte LLP) for
the Respondent, Tottenham Hotspur Limited
© CROWN COPYRIGHT 2017 40
2
DECISION
Introduction
1. This is an appeal from the decision of the First-Tier Tribunal (Tax Chamber)
(Judge Jonathan Richards and Mr Michael Sharp FCA) released on 3rd June 5 2016, by which the FTT decided that certain termination payments made to
two football players contracted to Tottenham Hotspur were neither taxable as
earnings from their employment under sections 9 and 62 of the Income Tax
(Earnings and Pensions) Act 2003 (“ITEPA”) nor subject to national insurance
contributions under section 6 of the Social Security Contributions and Benefits 10 Act 1992 (“SSCBA”).
2. Tottenham Hotspur Limited (“THL”), the respondent to this appeal, is the
parent company of Tottenham Hotspur Football & Athletic Co. Limited
(“THF&ACL”), a Premier League football club. We shall refer to both THL
and THF&ACL together as “Tottenham Hotspur”. 15
3. The appeal concerns lump sum payments made by Tottenham Hotspur to
professional footballers, Mr Wilson Palacios (“Mr Palacios”) and Mr Peter
Crouch (“Mr Crouch”) (together the “Players”), in connection with the early
termination of their employment contracts. The question is whether these
payments are to be treated as general “earnings from an employment” or an 20 “emolument of the employment” within the meaning of sections 9(2) and
62(2) of ITEPA or only as “payments … which are received directly or
indirectly in consideration or in consequence of, or otherwise in connection
with – (a) the termination of a person’s employment” within the meaning of
section 401(1) of ITEPA. It is common ground that if the payments are to be 25 properly regarded as “from an employment”, the first £30,000 will be taxable
(which it would not otherwise be), and the payments will be subject to national
insurance contributions under section 6 of SSCBA (which they would not
otherwise be).
4. The appeal raises the potentially important question of whether the FTT was 30 right to regard the authorities as establishing that the distinction is between
“receipt of remuneration or profits in respect of office” on the one hand
(which are “from an employment” and therefore taxable under section 9(2) of
ITEPA), and “sums paid in consideration of the surrender by the recipient of
rights in respect of the office” on the other hand (which are not “from an 35 employment” and therefore not taxable under section 9(2) of ITEPA). In this
context, the main submission that The Commissioners for Her Majesty’s
Revenue and Customs (“HMRC”) made was that the FTT ought to have held
that the fact that the Players’ employment contracts included clauses expressly
allowing for early termination of their fixed terms only by mutual consent was 40 sufficient to mean that the agreed termination payments were “from an
employment”.
Factual background
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