Jurisdiction(s):
United Kingdom

Court of Appeal (England and Wales): facilitation payments for pension changes are earnings subject to income tax and NICs; Tilley v Wales confined; Mairs v Haughey limited

Published on: 02 January 2024

Published by a LexisNexis Pensions expert

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Article summary

Revenue and Customs Commissioners v E.On UK plc [2023] EWCA Civ 1383, [2023] All ER (D) 34 (Dec)

What are the practical implications of this case?

The judgment offers a clear review of the authorities that may bear upon the sole statutory issue raised here: whether the sum in dispute amounts to earnings ‘from’ employment. In that setting, the Court of Appeal elucidated the ratio in Tilley v Wales [1943] AC 386 and marked out the limits of the ‘replacement principle’ from Mairs v Haughey [1994] 1 AC 303. With those propositions settled, and taking the First-Tier Tribunal’s findings about the nature of the payment and the circumstances in which it was made, the statutory question admitted of a straightforward resolution.

What was the background?

The respondent sought to lower the expenses tied to running its defined benefit scheme. It put forward several alterations to the scheme and, in return, presented a package of incentives to employees who were scheme members, which included a ‘facilitation payment’. That payment was determined as a percentage of salary, with a specified minimum. Accrued pension rights were unchanged. There were two categories of...

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