Simrajsar Limited & Anor v The Commissioners for HMRC
Decision date: 28 November 2024
Neutral citation: [2024] UKFTT 1072 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This case concerns joint appeals by Simrajsar Ltd and Achilles Products Ltd against HMRC determinations and NICs notices for £30,000 payments made to five directors on termination of their directorships. The Tribunal found the payments were gratuitous lump sums recognising past service and therefore constituted "earnings" (s.62) rather than termination payments within s.401 ITEPA, so the s.403 £30,000 exemption did not apply. The Tribunal also found the appellants failed to take reasonable care in RTI/PAYE submissions, permitting six‑year assessments, and dismissed the appeals (HMRC conceded 2015/16 NICs were out of time).
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
A termination payment will not fall within the s.401/s.403 exemption merely by being described as compensation; if a payment is a gratuitous lump sum recognising past service and lacks documentary justification as compensation for loss of office, it can be taxable as "earnings" under s.62. The payer bears the evidential burden to show the payment is not earnings where no termination/settlement agreement or clear rationale exists.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
It is not decisive that a payment is labelled "ex gratia" or set at the £30,000 tax‑exempt threshold; such features are indicators rather than determinative, and paying the maximum exemption without rationale may suggest remuneration rather than genuine compensation. Also, absence of formal tax advice or documentation undermines a payer’s case.