FTT decides case concerning the correct tax treatment of termination payments

FTT decides case concerning the correct tax treatment of termination payments made upon the transfer of two football players from Tottenham Hotspur to Stoke in Tottenham Hotspur Ltd v Revenue & Customs Commissioners (2016)


The case concerned the transfer of two players, Peter Crouch and Wilson Palacios, from Tottenham Hotspur to Stoke in August 2011. The question to be decided was whether the payments were “from employment”, such that they fell to be taxed under s.62 Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”). It was common ground that if they were not they fell within the termination payment provisions in Part 6, Chapter 3 of ITEPA.

The Appeal

HMRC argued that the contracts (which incorporated FA, FIFA and Premier League rules) could only be terminated by mutual consent. Therefore any payments made to secure that consent were made under the contract and were “from” employment.

The Appellant’s primary argument was that the principle in Henley v Murray [1950] 1 All ER 908 applied and was binding: namely, that payments made in consideration of the abrogation of the contract were not “from” employment. No breach of contract was necessary.

Alternatively, the Appellant argued that there was a breach of contract as the club told the players that they would not be played for the remainder of their contract. In such circumstances, the payments were damages payments and not “from” employment.

The Outcome

The First-tier Tribunal found that:

a)  Therefore there was no breach of contract by the Respondent, anticipatory or otherwise

b)  The contracts were terminated by mutual consent.

c)  The payments were made in consideration of the total abandonment of rights under the contract such that, pursuant to Henley v Murray, they were not “from” employment.

The Appeal was allowed. HMRC have been given permission to appeal to the Upper Tribunal.

Jolyon Maugham QC and Georgia Hicks appeared for the Appellant, instructed by Deloitte LLP.  Aparna Nathan appeared for HMRC, instructed by the General Counsel and Solicitor to HM Revenue and Customs.

To read the full decision, please click here

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