Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

Compensation or motivation?

31 January 2011
Issue: 4290 / Categories: Tax cases , Employees , Income Tax
Kuehne & Nagel Drinks Logistics Ltd and others v CRC, Upper Tribunal (Tax and Chancery Chamber)

The taxpayer company agreed to establish a joint venture with Scottish & Newcastle UK Ltd. Around 2 000 employees were transferred to the new venture.

The workers threatened industrial action because the benefits provided by the new business did not match up to those offered by Scottish & Newcastle.

After several meetings the taxpayer company agreed to make payments of £5 000 to each employee in consideration of the loss of pension rights.

However the tax treatment of that payment was disputed. The employees argued that the payments were made as compensation for their lost pension entitlements but HMRC insisted the payments arose from employment and were therefore subject to tax and National Insurance.

The First-tier Tribunal found the payments had been made to secure the motivation of the employees and were taxable as earnings from employment...

If you or your firm subscribes to, please click the login box below:

If you are not a subscriber but are a registered user or have a free trial, please enter your details in the following boxes:

Alternatively, you can register free of charge to read a limited amount of subscriber content per month.
Once you have registered, you will receive an email directing you back to read this item in full.

Please reach out to customer services at +44 (0) 330 161 1234 or '' for further assistance.

back to top icon