HMRC’s appeal to the Upper Tribunal over termination payments made to two football players employed by Tottenham Hotspur has been rejected. The case related to the tax position of termination payments made to two professional footballers in connection with the early termination of their employment contracts.
This case had already passed through the First-Tier Tribunal, who ruled that the payments were not taxable as earnings from their employment nor were the payments subject to national insurance contributions (NICs).
HMRC appealed this decision to the Upper Tribunal on the basis that in their view the payments represented earnings from employment. The Upper Tribunal looked at the question of whether these payments are to be treated as general 'earnings from an employment' an 'emolument of the employment' or as payment relating to the termination of employment.
The Upper Tribunal examined a number of options but put significant weight on the fact that the players in question were under pressure to agree to the payments to avoid being left on the bench or having their careers impaired. In the end, the Upper Tribunal upheld the decision of the First-Tier Tribunal and agreed that the payments were not general earnings and therefore not subject to tax. HMRC's appeal was dismissed.