Spurs one, HMRC nil

Payments made to employees on termination of contracts

In August 2011 Tottenham Hotspur transferred two players to Stoke City before their contracts ended. A dispute arose over the tax and National Insurance liability of the payments made to the players. HMRC argued that the payments were earnings from employment and should be subject to tax under ITEPA 2003  s 9 and National Insurance. On behalf of the club it was said that the payments were made in return for giving up their rights to be employed until their contract expired. They were not made as a result of their contracts.

The First-tier Tribunal said on the basis that both parties agreed the issue was whether the payments were ‘from’ the players’ employment it was necessary to focus on why they had been made. In this case none of the early termination provisions applied to either player....