Upper Tribunal Tax and Chancery Chamber

[2025] UKUT 00185 (TCC)

Fecha: 09-Abr-2025

The Tribunal’s view

The Tribunal’s view

596.

We started with the meaning of “relevant income”. This is “the gross amount of all benefits received by the individual from the employment” in question. The term “benefits” is then widely defined (our emphases) to include “salary, bonus, pension contributions, share options and share schemes” and is not limited to those items. There is thus no exclusion for signing on bonuses.

597.

In addition, some “benefits” arise from work carried out during more than one year: for example share schemes and share options are typically earned over a period, at the end of which entitlement crystallises. The term “benefits” thus includes all sums earned in the year, irrespective of when the work was done. Consistently with that approach, there is no reason to exclude earnings which compensate for the loss of income from a previous employer.

598.

We also took into account the reasons given in the DEPP for using a person’s earnings as the basis for the penalty, which are as follows:

(1)

The first reason is that individuals receive remuneration commensurate with their responsibilities, and so it is reasonable to base the amount of penalty for failure to discharge their duties properly on the remuneration received. Here, the Bank had decided to pay Mr Arden earnings which included the signing-on bonus, and must therefore have decided that the total package was commensurate with his responsibilities, otherwise they would not have agreed to make the payment. In other words, it was part and parcel of the package to which he signed up when he took the new role.

(2)

The second reason is that “the extent of the financial benefit earned by an individual is relevant in terms of the size of the financial penalty necessary to act as a credible deterrent”. The Authority clearly took this into account, because it decided that a penalty calculated based on Mr Arden’s earnings was sufficient to act as a deterrent to him and others and no additional amount was required under Step 4, see §593.

(3)

The third reason is that even where a person’s work is only partly related to a “controlled function”, it is still appropriate to base the relevant income figure on all of the benefit an individual gains from the relevant employment. This, like the definition of “benefits” shows that a broad-brush approach is taken: there is no scope for apportioning a person’s earnings to take into account different job roles.

599.

Taking into account all the above, we therefore agree with the Authority that Mr Arden’s earnings at Step 2(1)-(3) of the calculation includes his signing-on bonus.