| Employment Income: Emoluments |
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compensation for its loss is also tax-free.104 In Mairs v Haughey the Court of Appeal in Northern Ireland105 made the point more sharply by holding that the payment was made in order to compensate for loss of those rights and not as an inducement to enter into the new contract of employment. In Mairs v Haughey the business of the employer, R1, was being bought out by a new company, R2. E, the taxpayer employee, was offered an employment by the new employer, R2, on condition that he did not take the redundancy payments due to him from R1 under a non-statutory redundancy scheme but should, in the event of the buy-out being successful, receive an ex gratia sum from R1 the company, which was the sole shareholder in R2. Part of that sum was equal to a fraction of what would have been received for redundancy under the old scheme. The part which was for becoming an employee with the new company was taxable by reason of Shilton v Wilmshurst but the other was not.106 In Mairs v Haughey Lord Woolf also said that prima facie a payment made after the termination of employment is not an emolument from the employment unless for example it is simply deferred remuneration.107 |
The reasoning in Mairs v Haughey was applied in Wilcock v Eve108 where it was held that an ex gratia payment to an employee for loss of rights under a share option scheme was not taxable. The value of a grant of the right to a share option could be a taxable emolument but the value realised on its exercise could not. |
14A.4.4.5 Payment for Giving Up Right Already Lost |
If the right being compensated for no longer exists it is hard to establish that a payment is made to compensate for its loss. In Holland v Geoghegan,109 refuse collectors had had their right to sell salvaged property lawfully terminated; they went on strike but returned to work on payment of £450 compensation for loss of earnings due to the termination of the scheme. Foster J, reversing the Special Commissioners, held that since the right to sell salvaged property had been lawfully terminated the payment was not one of compensation for loss of a right but an inducement to return to work, and so taxable. |