Michael Saunders v The Commissioners for HMRC
[2024] UKFTT 300 (TC)
Louis Daniel Moore v The Commissioners for HMRC
25 April 2023
[2023] UKFTT 399 (TC)
First-tier Tribunal
Mr. Moore got stock options (RSUs) after his company sold. He said they were payment for his shares, but the judge said they were a bonus to keep him working for the buyer. Because of this, he has to pay the tax on them.
Key Facts
- •Mr. Moore appeals against Closure Notices for 2008/09 and 2009/10 charging him with additional income tax of approximately £1,133,875.74.
- •Mr. Moore was a minority shareholder and employee of Wombat Financial Software Inc, which was sold to NYSE Euronext.
- •Upon closing, Mr. Moore received 151,630 Restricted Stock Units (RSUs) from NYSE, vesting in shares over the following years.
- •The appeal concerns payments received upon the vesting of the RSUs in 2009 and 2010.
- •HMRC assessed the RSU receipts as taxable employment income, subject to income tax and National Insurance Contributions.
- •The only disputed issue was whether consideration was given for the acquisition of the RSUs, constituting a “deductible amount” under section 480(2) ITEPA.
Legal Principles
RSUs are employment-related securities options under sections 420 and 471 ITEPA.
Income Tax (Earnings and Pensions) Act 2003 (ITEPA)
Consideration for the acquisition of employment-related securities options, if any, is a deductible amount under section 480(2) ITEPA.
ITEPA
Consideration does not include the performance of employment duties (section 421A ITEPA).
ITEPA
Income tax on emoluments is principally a tax on payments by an employer to an employee as a reward for work.
RFC 2012 Plc v Advocate General for Scotland [2017] UKSC 45
The question of what constitutes consideration depends on the construction of the relevant agreement.
Sjumarken v HMRC [2017] STC 239
Outcomes
Appeal dismissed.
The RSUs were primarily part of an incentive and retention scheme, not consideration for the sale of shares. The additional payment to Mr. Moore was either part of the incentive/retention package or a reward for facilitating the deal, making it taxable as income.