Payments received by footballers on a transfer between clubs
Our pick of this week's cases
InTottenham Hotspur v HMRC[2016] UKFTT 389 (3 June 2016), the FTT found that payments received by footballers on a transfer between clubs were not ‘from’ their employment and therefore were not subject to NICs; and were only subject to income tax above the £30,000 threshold.
The appellant was the parent company of the well-known football club. In 2011, Tottenham had paid two of its players, Peter Crouch and Wilson Palacios, for their agreement to leave Tottenham to join Stoke City. The issue was whether, as HMRC contended, the payments were earnings fully subject to income tax and NICs or compensation for early termination and therefore not ‘from’ the players’ employment.
The FTT pointed out that the fact that the parties might have had substantial reasons not connected with the players’ employments for making or receiving the payments (for example, Tottenham’s wish to secure a transfer fee) was not sufficient to prevent the payments being ‘from’ employment, provided that there was a ‘sufficiently substantial’ employment-related reason for making the payments (see Kuehne + Nagel [2012] EWCA Civ 34).
There were provisions that would have entitled Tottenham to terminate the players’ contracts early if particular circumstances had arisen. However, none of these early termination provisions were engaged, so neither the players nor Tottenham had any operative right of termination. Tottenham had therefore made the payments in return for the surrender of the players’ rights under their employment contracts.
As the contracts were not terminated following a breach of contract, the termination was by mutual agreement (although both the players and Tottenham had been under pressure to reach an agreement). Additionally, both the FIFA rules and the employment contracts permitted the parties to terminate the contracts early by mutual agreement. However, payments made following such a mutual agreement were not within the scope of the principle in EMI Group Electronics [1999] STC 803, as the contracts had not specifically provided for the payments. The payments under the mutual agreement were therefore not ‘from’ employment.
Why it matters: The FTT noted that whether or not a contract provided for the possibility to terminate it by mutual agreement was irrelevant, given that any contract could, in any event, be so terminated. However, payments made following such a mutual agreement were not within the scope of the principle in EMI Group Electronics.
Payments received by footballers on a transfer between clubs
Our pick of this week's cases
InTottenham Hotspur v HMRC[2016] UKFTT 389 (3 June 2016), the FTT found that payments received by footballers on a transfer between clubs were not ‘from’ their employment and therefore were not subject to NICs; and were only subject to income tax above the £30,000 threshold.
The appellant was the parent company of the well-known football club. In 2011, Tottenham had paid two of its players, Peter Crouch and Wilson Palacios, for their agreement to leave Tottenham to join Stoke City. The issue was whether, as HMRC contended, the payments were earnings fully subject to income tax and NICs or compensation for early termination and therefore not ‘from’ the players’ employment.
The FTT pointed out that the fact that the parties might have had substantial reasons not connected with the players’ employments for making or receiving the payments (for example, Tottenham’s wish to secure a transfer fee) was not sufficient to prevent the payments being ‘from’ employment, provided that there was a ‘sufficiently substantial’ employment-related reason for making the payments (see Kuehne + Nagel [2012] EWCA Civ 34).
There were provisions that would have entitled Tottenham to terminate the players’ contracts early if particular circumstances had arisen. However, none of these early termination provisions were engaged, so neither the players nor Tottenham had any operative right of termination. Tottenham had therefore made the payments in return for the surrender of the players’ rights under their employment contracts.
As the contracts were not terminated following a breach of contract, the termination was by mutual agreement (although both the players and Tottenham had been under pressure to reach an agreement). Additionally, both the FIFA rules and the employment contracts permitted the parties to terminate the contracts early by mutual agreement. However, payments made following such a mutual agreement were not within the scope of the principle in EMI Group Electronics [1999] STC 803, as the contracts had not specifically provided for the payments. The payments under the mutual agreement were therefore not ‘from’ employment.
Why it matters: The FTT noted that whether or not a contract provided for the possibility to terminate it by mutual agreement was irrelevant, given that any contract could, in any event, be so terminated. However, payments made following such a mutual agreement were not within the scope of the principle in EMI Group Electronics.
