McAllister v Revenue And Customs (INCOME TAX - employee contractually entitled to ICT allowance) [2021] UKFTT 232 (TC) (23 June 2021)

McAllister v Revenue And Customs (INCOME TAX - employee contractually entitled to ICT allowance) [2021] UKFTT 232 (TC) (23 June 2021)

The lump sum payment to Mr McAllister was made in the context of the employment relationship, as compensation for the withdrawal of the ICT allowance, which was itself a taxable emolument. The payment was intended as a replacement for future ICT allowance payments and arose from the employment. Therefore, it constitutes an emolument of employment under section 62 ITEPA 2003 and is fully taxable as earnings.

Citation
[2021] UKFTT 232 (TC)
Parties
Appellant: Patrick McAllister; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
23 June 2021
Procedural Posture
Income Tax Appeal / First Tier Tribunal (tax) Substantive Decision
Outcome
Appeal dismissed
Legal Topics
Income Tax, Employment Emoluments, Contract Variation, Equal Pay, Taxation of Compensation Payments
Tax Law Employment Law Income Tax Employment Emoluments Contract Variation Equal Pay Taxation of Compensation Payments

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Parties

Patrick McAllister

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Income Tax Appeal / First Tier Tribunal (tax) Substantive Decision

Legal Issues

  1. 1 Whether a lump sum payment made to an employee for surrendering a contractual ICT allowance is an emolument of employment under section 62 ITEPA 2003 and thus taxable as earnings, or whether it falls under section 401 ITEPA and is eligible for partial tax exemption.

Ratio Decidendi

The lump sum payment to Mr McAllister was made in the context of the employment relationship, as compensation for the withdrawal of the ICT allowance, which was itself a taxable emolument. The payment was intended as a replacement for future ICT allowance payments and arose from the employment. Therefore, it constitutes an emolument of employment under section 62 ITEPA 2003 and is fully taxable as earnings.

Court Disposition

Appeal dismissed

Orders

  • The payment is an emolument of employment under section 62 ITEPA 2003 and is taxable as earnings.