In HMRC v Murphy, the Court of Appeal overturned a decision from the Upper Tribunal which held that ‘profit’ in ITEPA 2003 s 62(2)(b) means net profit rather than gross profit. Whether a payment to an employee is taxable employment income therefore requires a two-stage analysis: first, is the payment from the employment, and second, is it an allowable deduction under ITEPA 2003 Part 5. The decision reminds practitioners of the need for clarity as to how payments under settlement agreements are expressly characterised within the agreement itself.
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In HMRC v Murphy, the Court of Appeal overturned a decision from the Upper Tribunal which held that ‘profit’ in ITEPA 2003 s 62(2)(b) means net profit rather than gross profit. Whether a payment to an employee is taxable employment income therefore requires a two-stage analysis: first, is the payment from the employment, and second, is it an allowable deduction under ITEPA 2003 Part 5. The decision reminds practitioners of the need for clarity as to how payments under settlement agreements are expressly characterised within the agreement itself.
If you are not a subscriber, subscribe now to read this content.
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