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 were voluntary, discretionary, and made in recognition of past services, satisfying the definition of 'gratuity' under Regulation 5. The appellant neither directly nor indirectly allocated or made the payments. Therefore, the payments are disregarded in calculating earnings for Class 1 NICs, and the appellant is not liable for the NICs claimed by HMRC.

Citation
[2011] UKFTT 438 (TC)
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
Tax Appeal / First Tier Tribunal (tax), Substantive Hearing and Decision
Outcome
Appeal allowed
Legal Topics
National Insurance Contributions, Employee Benefit Trusts, Gratuities, Employment Income, Exemptions and Reliefs
Tax Law Social Security Law National Insurance Contributions Employee Benefit Trusts Gratuities Employment Income Exemptions and Reliefs

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Parties

Knowledgepoint 360 Group Limited

Appellant

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

Respondents

Procedural Posture

Tax Appeal / First Tier Tribunal (tax), Substantive Hearing and Decision

Legal Issues

  1. 1 Whether payments made by an employee benefit trust to employees following a company sale are 'gratuities' under Regulation 5 of the Social Security (Contributions) Regulations 2001 and thus disregarded for Class 1 NIC purposes
  2. 2 Whether the appellant indirectly allocated or made the payments to the employee

Ratio Decidendi

The payments made by the employee benefit trust were voluntary, discretionary, and made in recognition of past services, satisfying the definition of 'gratuity' under Regulation 5. The appellant neither directly nor indirectly allocated or made the payments. Therefore, the payments are disregarded in calculating earnings for Class 1 NICs, and the appellant is not liable for the NICs claimed by HMRC.

Court Disposition

Appeal allowed

Orders

  • Appellant not liable for primary or secondary Class 1 NICs on the relevant payments.
  • Appellant entitled to refund of secondary Class 1 NICs paid by trustees in respect of earlier payments.