The Commissioners for HMRC v E.ON UK Plc
[2023] EWCA Civ 1383
OOCL UK Branch v The Commissioners for HMRC
24 November 2023
[2023] UKFTT 996 (TC)
First-tier Tribunal
A former boss gave a big thank-you bonus to all his employees after selling the company. Even though the boss, not the company, paid it, the tax court said it was still taxable income because the employees only got the bonus because they were employees. It was a gift, but a gift given because of their jobs.
Key Facts
- •OOCL UK Branch employees received payments from the former majority shareholder, Mr. CC Tung, after the sale of OOCL.
- •The payments were made as a gesture of appreciation and were funded by Mr. Tung personally.
- •Payments were processed through OOCL's payroll system and were labelled as 'Bonus' on payslips.
- •HMRC assessed the payments as taxable income and NICs.
- •OOCL appealed the assessment.
Legal Principles
Whether a payment is income 'from' employment depends on the circumstances and whether employment is the causa causans (real reason) for the payment.
Collins v HMRC [2012] UKFTT 411 (TC) and KA Rogers v HMRC [2011] UKFTT 167 (TC)
For a payment to be considered a benefit 'by reason of' employment, employment must be an operative cause, not necessarily the sole or dominant cause.
Wicks v Firth [1982] 1 Ch 255 and Vermilion Holdings Limited [2020] UKUT 162 (TCC)
The benefits code (ITEPA s.201) applies to payments funded by third parties, requiring an assessment of whether employment is an operative cause for the payment.
ITEPA sections 201 and 209
In determining whether a payment is a gift, the recipient's perspective is relevant.
Moorhouse v Dooland (1955) 36 TC 1
Outcomes
Appeal dismissed.
The Tribunal found that the payments were not income 'from' employment but were benefits 'by reason of' employment, as employment was a condition for receiving the payment. Therefore, they were taxable under ITEPA s. 201 and subject to NICs under SSCA s. 3.