In Tottenham Hotspur Limited v HMRC [2016] UKFTT TC05143 the First Tier Tribunal (FTT) found that payments to players were termination payments and not subject to NIC.

  • In 2011 Tottenham reached an agreement with Peter Crouch and Wilson Palacios to make payments to them to leave the club and join Stoke.
  • The players’ contracts were for a fixed term.
  • The contracts included a provision for early termination in certain circumstances, which had not arisen, or by mutual agreement.
  • The club treated the payments as compensation for early termination and not subject to National Insurance (NIC).  The first £30,000 was treated as exempt from income tax.
  • HMRC disagreed, saying that the payments were “from employment” and were therefore earnings fully subject to income tax and NIC.

HMRC argued that:

  • As the contracts provided for termination by mutual consent these payments must flow “from” the contracts and therefore from employment.
  • In order for payments to be a termination payment and not “from employment” there would need to be a breach of contract rather than termination by mutual consent.

Allowing Tottenham’s appeal, the FTT concluded that:

  • As it is a basic principle of contract law that any contract can be terminated by mutual consent, the existence of the contract provision was not relevant.
  • A breach of contract is not required in order for payments to be a termination payment.
  • The club and the players could mutually agree to a payment for terminating the contracts without the payment arising from the terms of the contract.


At Budget 2016, the government announced that from April 2018, termination payments above £30,000 would be subject to National Insurance as well as income tax.


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Case reference Tottenham Hotspur Limited v HMRC [2016] UKFTT TC05143


HMRC have appealed to the Upper Tribunal.