In L Sjumarken v HMRC (2015) TC04557, a taxpayer failed to declare the correct earnings following termination of his employment. There were issues in respect of share valuation and giving up share options.


  • Mr Sjumarken was employed by BNP Paribas (BNP) until 18 October 2005.
  • During his employment he had accrued rights to a number of shares (which vested upon the termination of his employment), as well as 3,000 long dated options.
  • Upon the termination of his employment, he received:
    • £117,450 in cash as a termination payment
    • 3 months’ pay in lieu of notice
    • £56,863 cash as part of a cash incentive scheme (basic rate tax withheld)
    • The shares he had rights to under an unapproved share incentive plan – BNP included these in his P14 at a valuation of £144,632 (basic rate tax withheld)
  • It transpired that in accepting the termination payment, Mr Sjumarken gave up his rights to the long dated options, valued at approximately £130,286 at the time.
  • Mr Sjumarken did not include the value of the shares as taxable income on his return, in the (incorrect) belief that they were the result of an approved and tax free share scheme.
  • This led to an enquiry and assessment for additional tax due on the share award and the cash incentive receipt, which had only suffered basic rate tax.


The nature of Mr Sjumarken’s grievances changed during the course of correspondence with HMRC, and there were just two issues put before the FTT for consideration:

  1. That the valuation of the shares was excessive. The shares were restricted, and so the valuation needed to be lowered to reflect this.
  2. That the giving up of the long dated options represented consideration paid by the taxpayer to BNP and should therefore offset taxable earnings.


In respect of the share valuation, the FTT found that despite the shares not being subject to any written restrictions based on the (limited) paperwork presented, the taxpayer did in fact experience restrictions in practice, particularly in reference to when they could be sold. The FTT therefore ordered the parties to re-negotiate the valuation of the shares to reflect this.

In respect of the second matter, the FTT found that it was clear based on the documentation that the long dated options were given up in exchange for the termination payment, and Mr Sjumarken not understanding this did not change the fact. There was no separate bargain, and the value of the rights surrendered could not therefore be used to reduce taxable income further.