Court of Appeal hears employment tax appeal concerning the meaning of “profit” under the Income Tax (Earnings and Pensions) Act 2003

Yesterday the Court of Appeal heard argument in Murphy v HMRC in an appeal concerning whether the Upper Tribunal was correct to hold that “profit” within section 62(1)(b) of the Income Tax (Earnings and Pensions) Act 2003 means net profit rather than gross profit.

The effect of the Upper Tribunal decision was to allow Mr Murphy to reduce the gross sum received under a settlement agreement compromising a claim for unpaid wages by the amount payable to his legal representatives pursuant to a Damages Based Agreement. Several commentators have observed that the Upper Tribunal’s decision effectively allows a taxpayer to set off sums against income which would not be allowed as a deduction from taxable earnings.

The appeal was live streamed on the basis that it was considered by the Court of Appeal to be high profile and legally significant. Recordings of the hearing are available here: morning, and afternoon.  Judgment is reserved.

Joshua Carey and Sam Way appeared for HMRC.

Back to News

Additional Information