CONFIDENTIAL
Cmissioner of Inland Revenue
rom
Ref.
(30) HQ 264/833C
Tel. No.
in
5945001
2 June 1992
Date
MEMO
"/>
Secretary for the Treasury To [Attn: Mr Andrew Wells]
L/M to CSB/S5-8 V
Your Ref.
in
27.5.92
dated
HMQCS Scheme
I refer to your memo of 27 May 1992 enclosing a copy of the draft proposals for the Scheme. I have studied the additional information and consider that, under the present terms of the law, the payments in question would generally be chargeable to Salaries
Tax.
2.
Leaving aside for the moment amounts paid in the exceptional circumstances set out in paragraphs 9 and 10, as I understand the Scheme, annual payments commencing in July 1997 will be made to specified officers who continue in the service of the HKSAR. In my opinion, such payments would represent chargeable income of the officers concerned, irrespective of whether they are regarded as having ceased employment with HKG on 30 June 1997 before taking up employment with HKSAR on 1 July 1997.
3.
If the correct position is that a cessation of employment would not be involved (ie the officers would simply continue to be employees of the Hong Kong Government), the English decision in Hamblett v Godfrey [1987] STC 60 provides support for assessing the payments. The case involved the question of whether a sum of £1,000 paid to a civil servant for giving up her rights to join a trade union was taxable. The Court of Appeal held that the rights which were withdrawn were part of the employer and employee relationship and were an incident of the particular employment. The employment was therefore the source of the payment and accordingly it was chargeable.
4.
On the other hand, if in fact a cessation of employment decision in Shilton v would be involved, the House of Lords Wilmshurst [1991] STC 88 is pertinent. In that case a fee was paid to a professional footballer by his club as an inducement to him to transfer to another club. It was held that as the club had made the payment to the player in consideration for him agreeing to act as or become an employee of the new club, the payment was therefore assessable. The House of Lords did not consider it necessary for the party making the payment to be interested in the services to be performed under the contract of employment. The view was expressed that an emolument arises from employment if it is provided as a reward or inducement for the
or become an remain employee to employee.
CONFIDENTIAL ##
No comments yet.
Private notes are available after approval.