Mairs (Inspector of Taxes) v Haughey

The House of Lords considered whether payments made to employees when a top-up redundancy scheme ended following the privatisation of their employer were taxable as emoluments under Schedule E or were instead to be treated as non-taxable benefits or other non-employment receipts. The court analysed the statutory concepts in the Income and Corporation Taxes Act 1988, notably sections 19(1), 154, 156(1) and 168(3), and considered the connection between the payments and the employment contract.

The key legal principles addressed were (i) the characterisation of a payment as an "emolument" within the meaning of Schedule E and s 19(1), and (ii) the relevance of the circumstances of privatisation and the termination or modification of a redundancy scheme to that characterisation.

Background and parties: Mairs, acting as Inspector of Taxes, and Haughey (the taxpayer). The dispute concerned payments made to employees on termination of a top-up redundancy scheme following the privatisation of their employer.

Nature of the claim: The question before the court was whether those payments were chargeable to income tax as emoluments of employment under Schedule E and section 19(1) of the Income and Corporation Taxes Act 1988, or whether they fell outside that charge as non-taxable benefits or other receipts.

Procedural posture: The matter was before the House of Lords on appeal. The judgment supplied does not state the earlier decisions or the complete appellate history.

Issues framed:

• Whether the payments constituted "emoluments" of employment for the purposes of Schedule E and s 19(1).
• How ss 154, 156(1) and 168(3) of the Income and Corporation Taxes Act 1988 bear on the tax treatment of payments made in connection with redundancy and employer privatisation.

Court’s reasoning (concise): The court examined the statutory definitions and their application to the factual matrix of a top-up redundancy scheme terminated after privatisation, focusing on whether there was an employment-related nexus sufficient to characterise the sums as taxable emoluments. The judgment considers the nature and purpose of the payments, the contractual and contextual links to employment and to the redundancy arrangements, and the interpretation of the cited statutory provisions. The supplied text does not set out the operative final disposition in full.