A taxpayer has lost her case at the Upper Tribunal (UT) after a similar loss at the First-tier Tribunal (FTT).  The taxpayer had been dismissed from a position at a bank and on termination of her employment took the bank and the employing company to the Employment Tribunal (ET).  Before the case reached the ET the bank and the taxpayer entered into a settlement agreement whereby the taxpayer was paid £6m.

When making the settlement payment the bank withheld PAYE tax but the taxpayer disagreed and submitted a tax return claiming the tax back.  HMRC disagreed and the case went to the FTT that held that the payment was taxable.  The taxpayer again disagreed and appealed to the UT.

The UT found in favour of HMRC and dismissed all three grounds of appeal.

The first ground of appeal concerned the interpretation of the relevant legislation (s401 of ITEPA 2003) and the taxpayer’s counsel argued that the FTT has given too wide a meaning to the charging provisions.  The UT disagreed, finding that where exclusions to the wide breadth of the charging provision were available that the taxpayer had sought to use this relief (such as the employer paying for the employee’s legal fees and the first £30k being exempt).

The second ground concerned the findings that the FTT made were an error of law as they were not supportable.  The UT disagreed, it found that the FTT hadn’t erred in law and the findings it made were rationally supportable.

The third ground was that the FTT hadn’t considered apportionment of the settlement payment between taxable and non-taxable components.  The UT firmly rejected this ground holding that it had been up to the taxpayer to argue this at the FTT but the taxpayer hadn’t and it was now too late to discuss apportionment.

The decision can be found at: SHIVANI MATHUR v THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS [2024] UKUT 00038 (TCC) – GOV.UK (www.gov.uk)

This is a clear decision from the UT clarifying that the charging provisions of the legislation relating to termination payments to employees does indeed have a wide reading and most payments are caught.

Please contact if you have any questions over employment termination payment or employment related securities, we are experienced with the nuances and can help ensure there are no surprises.  As this case highlights, employment termination payments do have some reliefs, but these are quite specific.