Shilton v Wilmshurst
A payment made by a third party to induce a person to enter into an employment is an emolument from that employment, so a payment by a football club to a player to agree to a transfer was taxable.
Facts
Peter Shilton, the England goalkeeper, was employed by Nottingham Forest Football Club. Forest agreed to transfer him to Southampton Football Club, and paid him 75,000 pounds to induce him to agree to the transfer and to enter into an employment contract with Southampton. Mr Shilton argued that the payment was not an emolument from his employment with Southampton, because it was paid by Forest, which was not his employer under the new contract, and was not an emolument from his employment with Forest, because it was paid to end that employment.
Legal principle
The House of Lords held that the payment was taxable as an emolument from his employment with Southampton. Lord Templeman said that an emolument from employment means an emolument from being or becoming an employee, and that a payment made to induce a person to enter into a contract of employment may be an emolument from that employment, whether it is paid by the new employer or by a third party. Forest had paid the sum to induce Mr Shilton to enter into the employment with Southampton, because it wanted to receive the transfer fee, and the payment was therefore an emolument from that employment.
Related cases on income and corporation tax: employment, trading and residence
- Edwards v Bairstow [1956] AC 14
- Hochstrasser v Mayes [1960] AC 376
- Jones v Garnett [2007] UKHL 35
- Mallalieu v Drummond [1983] 2 AC 861
- Marks & Spencer plc v Halsey (2005) Case C-446/03
- Pepper v Hart [1993] AC 593
- R (Gaines-Cooper) v Revenue and Customs Commissioners [2011] UKSC 47
- RFC 2012 plc v Advocate General for Scotland [2017] UKSC 45
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