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.