The claimant in Hill v Revenue & Customs worked in the car industry, based at a location in Bedfordshire. His contract said that he could be required to work at other sites within a 10 mile radius. In 2007 he was seconded to a company in London. This continued until 2010 when he was transferred under TUPE to the London company.
The claimant had hoped to return to Bedfordshire at the end of the secondment and was unhappy at having to continue to work in London and about the fact that his employer had not consulted him in advance about the transfer. He agreed to resolve his grievance by accepting £15,000 from each of the employers as settlement. HMRC assessed him to income tax on the £30,000 as earnings. The claimant contended that the payment was exempt from income tax because it was a termination payment which did not exceed the £30,000 tax-free threshold.
Under the tax legislation, in order to be successful, the claimant needed to be able to show that the payments were received in connection with the termination of his employment, a change in his duties or a change in earnings. The Tax Tribunal noted that there is some dispute about whether the deemed continuation of employment under TUPE, preventing a termination of employment, applies for tax purposes. However, in any event, the payments were "earnings" because they were compensation for the requirement to work, after the transfer, more than 10 miles from his original workplace location.
At no point during his secondment did the claimant ask for compensation for a breach of his contract. The issue arose only when the secondment came to an end and the TUPE transfer happened. These facts, coupled with a provision in the compromise agreement requiring payments to be refunded in the event that the claimant's employment with the transferee terminated within two years, convinced the Tribunal (despite its sympathy for the claimant's grievance and his assumption when negotiating the settlement that the payment would be tax-free) that the payments had to be regarded as related to his employment.