Charman v Revenue & Customs (INCOME TAX/CORPORATION TAX : Employment income) [2018] UKFTT 765 (TC) (20 December 2018)

Charman v Revenue & Customs (INCOME TAX/CORPORATION TAX : Employment income) [2018] UKFTT 765 (TC) (20 December 2018)

The Tribunal found that Mr Charman did not cease to be UK tax resident until November 2003, as there was no distinct break in his pattern of life in the UK before that date. His employment income, bonuses, founder’s fee, restricted shares, and share options acquired or exercised prior to that date were taxable in the UK. The founder’s fee was employment income. The discovery assessment for 2003-4 was valid. HMRC’s assessments were upheld, subject to correction for double taxation of certain amounts.

Citation
[2018] UKFTT 765
Parties
Appellant: Mr John Charman; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
20 December 2018
Procedural Posture
Appeal Against Tax Assessments (first Tier Tribunal Tax) / Final Judgment After Substantive Hearing
Outcome
Appeal dismissed (subject to correction for double taxation)
Legal Topics
Income Tax, Residence for Tax Purposes, Employment Income, Discovery Assessments, Territoriality Principle, Share Options, Restricted Shares
Tax Law Income Tax Residence for Tax Purposes Employment Income Discovery Assessments Territoriality Principle Share Options Restricted Shares

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Parties

Mr John Charman

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

Appeal Against Tax Assessments (first Tier Tribunal Tax) / Final Judgment After Substantive Hearing

Legal Issues

  1. 1 When did the appellant cease to be UK tax resident?
  2. 2 Was the appellant tax resident in the UK when he received salary, bonus, expenses, founder’s fee, restricted shares, and share options?
  3. 3 Is the founder’s fee chargeable as employment income or under another head?

Ratio Decidendi

The Tribunal found that Mr Charman did not cease to be UK tax resident until November 2003, as there was no distinct break in his pattern of life in the UK before that date. His employment income, bonuses, founder’s fee, restricted shares, and share options acquired or exercised prior to that date were taxable in the UK. The founder’s fee was employment income. The discovery assessment for 2003-4 was valid. HMRC’s assessments were upheld, subject to correction for double taxation of certain amounts.

Court Disposition

Appeal dismissed (subject to correction for double taxation)

Orders

  • HMRC’s assessments for the relevant years are upheld, subject to adjustment to prevent double taxation of the same income.
  • The parties are to agree the precise figures reflecting the Tribunal’s findings.