InAndrew Hill v HMRC[2015] UKFTT 295 (19 June 2015), the FTT found that a payment made to an employee under a compromise agreement was an emolument.
Mr Hill had been working for General Motors (GM) when his employment had been transferred from GM to Saab City under the Transfer of Undertakings Regulations 2006.
Mr Hill had been unhappy with the transfer of his employment to Saab City, in particular because he was now working a long way from home, in breach of his employment contract. He had raised a grievance and a compromise agreement had been entered into. The issue was whether the payment fell within ITEPA 2003 s 403 so that it was exempt (as below the £30,000 threshold).
Mr Hill contended that he had not been paid to agree to a change in the terms of his contract of employment, but for agreeing not to pursue a claim for damages in respect of a breach of those terms. The FTT held, however, that in both cases the effect of the agreement between the parties was that, in return for receiving a payment, he had accepted that he would work far away from home. Furthermore, the compromise agreement required Mr Hill to refund all or part of the payment, in the event that he ceased to be employed by Saab City within two years of the payment; and this supported the proposition that the payment was an emolument.
Why it matters: In circumstances where the taxpayer’s employment continued and he was paid because of a change in the conditions of his employment, the payment by his employers had to be treated as an emolument, regardless of the fact that it was made under a compromise agreement.
InAndrew Hill v HMRC[2015] UKFTT 295 (19 June 2015), the FTT found that a payment made to an employee under a compromise agreement was an emolument.
Mr Hill had been working for General Motors (GM) when his employment had been transferred from GM to Saab City under the Transfer of Undertakings Regulations 2006.
Mr Hill had been unhappy with the transfer of his employment to Saab City, in particular because he was now working a long way from home, in breach of his employment contract. He had raised a grievance and a compromise agreement had been entered into. The issue was whether the payment fell within ITEPA 2003 s 403 so that it was exempt (as below the £30,000 threshold).
Mr Hill contended that he had not been paid to agree to a change in the terms of his contract of employment, but for agreeing not to pursue a claim for damages in respect of a breach of those terms. The FTT held, however, that in both cases the effect of the agreement between the parties was that, in return for receiving a payment, he had accepted that he would work far away from home. Furthermore, the compromise agreement required Mr Hill to refund all or part of the payment, in the event that he ceased to be employed by Saab City within two years of the payment; and this supported the proposition that the payment was an emolument.
Why it matters: In circumstances where the taxpayer’s employment continued and he was paid because of a change in the conditions of his employment, the payment by his employers had to be treated as an emolument, regardless of the fact that it was made under a compromise agreement.
