In HMRC v Tottenham Hotspur Limited [2017] UKUT 0453 (TCC), the Upper Tribunal (UT) considered whether termination payments to two football players (Peter Crouch and Wilson Palacios on their transfer to Stoke) should be subject to tax and NIC as earnings “from an employment” rather than under the special rules.

The case related to two players who were transferred to another club before the end of their fixed term contract with Spurs. HMRC argued that the existence of a termination clause (by mutual agreement) meant that any payments were made in connection with this, so would not be subject to the special rules for termination payments.

The First Tier Tribunal (FTT) considered the issue in 2016, resulting in A win for Tottenham Hotspur, saying:

  • 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.

The key question was whether the FTT was right to interpret the authorities as distinguishing between

  • “receipt of remuneration or profits in respect of an office”, as contended by HMRC, so subject to tax and NIC as “normal” salary; and
  • “sums paid in consideration of the surrender by the recipient of rights in respect of office”, as contended by the taxpayer, so subject to the special rules for termination payments

The UT paraphrased this as the distinction between

  • “Cases where the entire contract of employment is abrogated”; and
  • “Cases where the payment is made in pursuance of a pre-existing obligation to make such a payment arising under a contract of employment”

“This case”, said the UT, “squarely fell into the first category”.


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.

The full judgment includes a detailed analysis of the relevant precedents.


Our subscriber guide to Termination, redundancy and leaving payments

HMRC v Tottenham Hotspur Limited [2017] UKUT 0453 (TCC)

Tottenham Hotspur Limited v HMRC [2016] UKFTT TC05143