Spurs FC severance payments: remuneration or damages?

At a time when it wished to reduce its wage bill, Spurs FC persuaded two of its players to accept transfers to another club in return for substantial severance payments. The payments were made pursuant to FIFA rules providing that, if a player’s fixed term of employment was terminated by mutual agreement, compensation was to be paid. HMRC assessed the payments to income tax and NICs on the basis that, like contractual payments in lieu of notice, they were earnings from the employment. However, Spurs FC argued that compensation paid to achieve a termination by mutual agreement did not constitute earnings, but was taxable (above £30,000) only under the termination payment provisions of ITEPA 2003 s 401, and it made no difference that the compensation was provided for in the employment contract. The Upper Tribunal agreed.