Equity Advisory Limited & Anor v The Commissioners for HMRC
Decision date: 24 October 2024
Neutral citation: [2024] UKFTT 953 (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 a c.£4,367,496 payment made in September 2017 that HMRC characterised as taxable employment earnings. The Tribunal found the payment arose from Mr Mellor's services under a Consultancy Agreement with Equity Advisory Limited (EAL), that a subsequent purported assignment to Mr Mellor had no operative effect, and that PAYE and NICs were therefore due from EAL; the appeals were dismissed. Quantified liabilities included PAYE of £1,954,387.95 and NICs of £693,747.34.
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
The decisive legal finding is that where a company contractually receives fees for services performed by an individual through that company, the payment will be sourced in the individual's employment (and taxable as earnings) if the services are the reason for the payment; an attempted assignment of the company's contractual entitlement that does not comply with the original contract (and lacks the counterparty's consent) will not alter the contractual source for tax characterisation.
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
The Tribunal indicated that expert valuation of a contingent advisory fee as at the assignment date may be irrelevant to tax characterisation when the contractual source and substance govern, and that parol evidence or post‑hoc subjective explanations are of limited weight where an entire‑agreement clause and clear contractual terms apply.