Knowledgepoint 360 Group Ltd v Revenue & Customs [2011] UKFTT 438 (TC) (30 June 2011)

Knowledgepoint 360 Group Ltd v Revenue & Customs [2011] UKFTT 438 (TC) (30 June 2011)

The payments made by the employee benefit trust to Mrs Adshead were voluntary, discretionary, and not made under any obligation. The trust acted independently of the appellant, and the appellant did not allocate or make the payments, directly or indirectly. The payments were gratuities within the meaning of Regulation 5, and thus disregarded in calculating earnings for NICs. The appeal is allowed.

Citation
[2011] UKFTT 438
Parties
Appellant: Knowledgepoint 360 Group Limited; Respondents: The Commissioners for Her Majesty’s Revenue and Customs (NIC)
Jurisdiction
United Kingdom
Judgment Date
30 June 2011
Procedural Posture
Appeal Against HMRC Decision on National Insurance Contributions Liability / First Tier Tribunal (tax), Final Judgment
Outcome
Appeal allowed
Legal Topics
National Insurance Contributions, Employee Benefit Trusts, Gratuities, Employment Related Payments, Social Security (contributions) Regulations 2001
Tax Law Employment Law Social Security Law National Insurance Contributions Employee Benefit Trusts Gratuities Employment Related Payments Social Security (contributions) Regulations 2001

Case Brief

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Parties

Knowledgepoint 360 Group Limited

Appellant

The Commissioners for Her Majesty’s Revenue and Customs (NIC)

Respondents

Procedural Posture

Appeal Against HMRC Decision on National Insurance Contributions Liability / First Tier Tribunal (tax), Final Judgment

Legal Issues

  1. 1 Whether payments made by an employee benefit trust to an employee following the sale of the company constitute 'gratuities' under Regulation 5 of the Social Security (Contributions) Regulations 2001 and are thus disregarded in calculating earnings for NICs purposes
  2. 2 Whether the appellant indirectly allocated or made the payments to the employee, thus triggering NIC liability

Ratio Decidendi

The payments made by the employee benefit trust to Mrs Adshead were voluntary, discretionary, and not made under any obligation. The trust acted independently of the appellant, and the appellant did not allocate or make the payments, directly or indirectly. The payments were gratuities within the meaning of Regulation 5, and thus disregarded in calculating earnings for NICs. The appeal is allowed.

Court Disposition

Appeal allowed

Orders

  • The appellant is not liable to pay primary or secondary Class 1 National Insurance Contributions in respect of the payments made by the No. 1 Trust to Mrs Adshead during the relevant period.
  • The appellant is entitled to a refund of secondary Class 1 NICs paid by the trustees in respect of payments made to beneficiaries between 6 April 2002 and 5 April 2003.