Louis Daniel Moore v The Commissioners for HMRC
[2023] UKFTT 399 (TC)
Michael Saunders v The Commissioners for HMRC
2 April 2024
[2024] UKFTT 300 (TC)
First-tier Tribunal
A former employee received a large payment from stock options after he left his UK job and moved abroad. The taxman said it was taxable in the UK. The court agreed, saying the payment was directly linked to his work in the UK, even though it was paid later, and the fact that he left the company wasn't important because the plan was designed to reward his work while he was employed.
Key Facts
- •Mr. Saunders received a £1,236,956 payment from his former employer, HAUKL, related to stock appreciation rights (SARs).
- •His employment ended on 31 July 2016, and he became a non-UK resident on 1 August 2016.
- •The payment was received in January 2017.
- •HMRC issued a closure notice, asserting the payment was taxable UK income.
- •Mr. Saunders appealed, arguing the payment was not taxable in the UK.
Legal Principles
Income tax is imposed on employment income, including earnings as defined in ITEPA 2003.
ITEPA 2003, Part 2
For UK resident employees, general earnings are taxable in the year of receipt, even if the employment ended before the receipt.
ITEPA 2003, Chapter 4
In a split year, earnings attributable to the overseas part and not related to UK duties are excluded from UK tax.
ITEPA 2003, Section 15(1A)
The determination of whether a payment is 'earnings' from employment considers whether it's derived from the employment relationship.
Case law: Abbott v Philbin, Shilton v Wilmshurst, Hamblett v Godfrey, Edwards v Roberts, UBS AG v HMRC, RFC 2012 plc v Advocate General for Scotland
Outcomes
Appeal dismissed.
The payment was deemed earnings from Mr. Saunders' employment, earned during his UK residency, and therefore taxable in the UK.