The question as to whether or not monies are taxable as employment income is a common area of dispute in tax.  However, the First Tier Tribunal case of Colin Collins v HMRC involved a particularly unusual set of circumstances to which the question needed to be applied.
The case itself involved the payment of $2 million by a former shareholder of a Company to the taxpayer who had worked for that Company, before subsequently leaving and later being re-employed under the new ownership.
The precise facts of the case led the Tribunal to consider that the payment amounted to a gift by the former shareholder. HM Revenue and Customs had contended that it was a payment in connection with the taxpayer’s former or current employment.
Of significant interest is that the Tribunal set out in their written judgement a list of key points that lead them to their decision:

  • Was the payment gratuitous?
  • Was the payment expected?
  • Was it proportionate (for example in terms of past salary)?
  • Was there any regularity in the payments?
  • Who made the payment?
  • Was there a time delay in making the payment and if so was this delay cosmetic?
  • What was the occasion/reason for the payment?

While the list is of interest, the old adage remains that each case must be considered on its own merits.

HM Revenue and Customs have launched a new amnesty for taxpayers suspected of committing serious tax fraud.
Under the Contractual Disclosure Facility (CDF), HM Revenue and Customs will write to taxpayers that are suspected of committing tax fraud to offer the opportunity to make a disclosure of unpaid tax liabilities within 60 days.  In return HM Revenue and Customs will agree not to pursue criminal prosecution against the taxpayer.
Taxpayers that have not yet been contacted by HM Revenue and Customs may voluntarily request to be considered for the CDF.  Alternatively those with offshore assets could consider registering under the Liechtenstein Disclosure facility (LDF).
For more information and advice regarding the disclosure of tax to HM Revenue and Customs please contact Paul Davison at Eaves & Co on 0113 2443502.