The Commissioners for HM Revenue and Customs v Julian Martin
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Warren |
| Neutral Citation | [2014] UKUT 0429 (TCC),[2014] UKUT 0429 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Date | 22 September 2014 |
| Subject Matter | Tax,22 September 2014 |
| Published date | 01 December 2016 |
[2014] UKUT 0429 (TCC)
Appeal numbers FTC/35/2013 and FTC/57/2013
INCOME TAX - Liability of employee under his employment contract to refund a
proportion of a taxable Signing Bonus when the employee gave notice to resign
prior to the end of the period for which the employee had committed to remain an
employee – whether Signing Bonus “earnings”; whether repayment “negative
Taxable Earnings” – Yes – appeal dismissed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS Appellants
- and –
JULIAN MARTIN Respondent
Tribunal:
Mr Justice Warren, Chamber President
Sitting in public in London in the Rolls Building on 7 February 2014
Adam Tolley QC, counsel, instructed by the General Counsel and Solicitor to
HM Revenue and Customs, on behalf of the Appellants
Philip Ridgway, counsel, instructed by FSPG Chartered Accountants , on behalf
of the Respondent
© CROWN COPYRIGHT 2014
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Introduction
1. This is an appeal by the Appellants (“HMRC”) and a cross-appeal by the
Respondent (“Mr Martin”) against a decision of Judge Nowlan and Mr Agboola
(“the Tribunal”) released on 27 December 2012 (“the Decision”). Mr Adam
Tolley QC appears for HMRC; Mr Philip Ridgway appears for Mr Martin.
The facts
2. The facts are straightforward and common ground. They are set out in [6] to [15]
of the Decision. In summary:
a. Mr Martin and another individual were existing employees of a company
called JLT Risk Solutions Ltd (“JLT”) and for some reason in late 2005
JLT must have concluded that it was important to seek to ensure that both
employees were “tied in” and committed to remain employed. They thus
induced both employees to enter into new employment contracts, one of
the features of which was the endeavour to achieve that objective for a
five-year period.
b. A contract was entered into between Mr Martin and JLT on 7 November
2005 with an effective date of 1 November 2005 (“the Contract”).
Clauses 2.2 and 4.4 are important. I set them out in Annex 1 to this
Decision, together with Clause 10.1.c which is referred to in Clause 4.4.
As can be seen from Clause 4.4, Mr Martin was to receive (and did
receive) a signing bonus (defined as the “Signing Bonus”); its amount was
£250,000. There was also an obligation to make repayment in certain
cases of termination of employment. The basis for repayment was simple:
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it was a time-apportioned proportion of the amount of the Signing Bonus
according to the unexpired part of the 5 year period referred to in Clause
2.2.
c. Clause 9 imposed various restrictive covenants on Mr Martin during his
employment and after it had terminated.
d. Clause 10 conferred on JLT the liberty to terminate the Contract (i) on 6
months’ notice in the event of Mr Martin suffering various degrees of ill-
health, mental problems and bankruptcy or (ii) immediately if he was
convicted of a serious criminal offence or was guilty of certain forms of
misconduct.
e. On 25 November 2005, JLT paid Mr Martin his first salary payment and
the £250,000 Signing Bonus. Both were treated as emoluments and paid
under deduction of PAYE and employee’s NIC. The deductions meant that
Mr Martin received a net sum of £147,500 in respect of the Signing Bonus.
f. Mr Martin’s relevant pay slip showed the salary, the gross Signing Bonus,
and the various deductions, and indicated the relevant net receipt. The
Tribunal was shown Mr Martin’s tax return for the year 2005/2006 which
returned the receipts simply as taxable remuneration in the relevant year.
g. On 2 August 2006, Mr Martin and the other employee who had received a
similar Signing Bonus, wrote to JLT giving formal notice of their intended
resignation, giving 12 months’ notice to expire on 1 August 2007. JLT
replied in a letter dated 5 October 2006. The terms of that letter are of
some importance. I consider it in a moment. As a result, Mr Martin
became liable to pay to JLT under Clause 4.4 the sum of £162,500.
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