SHILTON Vs. WILMSHURST (INSPECTOR OF TAXES).

JUDGEMENT

(1.) The following judgments were handed down. SIR NICOLAS BROWNE -WILKINSON, V. C. This is an appeal by the Crown from a decision of Morritt J. The judge allowed an appeal by the taxpayer, the England goalkeeper Peter Shilton, from a decision of the general commissioners for the division of South Nottinghamshire that a payment of 75,000 made by Nottingham Forest Football Club to the taxpayer on his transfer from Nottingham Forest to Southampton Football Club was an emolument of the taxpayers employment with Southampton and therefore taxable under Case 1 of Schedule E in Sec. 181 of the Income and Corporation Tax Act 1970.

(2.) The case stated is reported at, [1988] STC 868; The relevant facts are stated by the judge, [1989] 1 W.L.R. 179 in his judgment, at pp. 180 -181, from which I take the following summary. By a contract dated September 28, 1979 the taxpayer had contracted to play as a professional footballer for Nottingham Forest until July 31, 1983. By the rules of the Football League, the taxpayer would be entitled from July 1983 to sign up with the club of his choice without that club being under any obligation to pay any transfer fee to Nottingham Forest. By July 1982 Nottingham Forest were under some pressure to raise money by the sale of players and to reduce their wages bill. In or about July 1982 the manager of Nottingham Forest received an offer from Southampton for the transfer of the taxpayer from Nottingham Forest to Southampton at a transfer fee of 325.000 subject to terms being agreed between the taxpayer and Southampton. This offer was accepted by Nottingham Forest. On the taxpayers return from holiday, the manager of Southampton told him that a transfer had been agreed upon subject to the taxpayer and Southampton agreeing to the terms of his new employment. The taxpayer in discussion with the manager of Nottingham Forest indicated that he would be prepared to move if the terms were right. The manager of Nottingham Forest indicated to the taxpayer that should the taxpayer agree to the terms for his employment with Southampton, Nottingham Forest might be willing to make a payment to the taxpayer for consenting to a transfer. The taxpayer agreed to the terms of his employment with Southampton which included a signing -on fee of 80,000. Following that agreement the taxpayer agreed with the manager of Nottingham Forest that Nottingham Forest would pay the taxpayer 75,000 if he agrees to his transfer to Southampton. On August 13, 1983 the taxpayer entered into his new contract with Southampton and on August 19, 1982 the board of Nottingham Forest agreed to pay the taxpayer the 75,000 (the Nottingham Forest payment) which was duly paid shortly thereafter.

(3.) The deal was attractive to Nottingham Forest because that club would receive a net sum of Rs. 250,000 (after making the Nottingham Forest payment) whereas if the taxpayer left them the following year they would receive nothing. The commissioners also found that the deal was attractive to the taxpayer : his new contract with Southampton gave him security for four years; the terms of his employment with Southampton were an improvement on those he was currently enjoying with Nottingham Forest and he would receive the signing on fee of Rs. 80,000 payable to him by Southampton.