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HMRC internal manual

Business Income Manual

Miscellaneous income: scope of the provisions: services - amount of work done

S687-S689 Income Tax (Trading and Other Income) Act 2005, S979-S981 Corporation Tax Act 2009

That an agreement does not require much work to be done does not affect the fact that the sum received is a payment for services, and is chargeable under the miscellaneous income sweep-up provisions.

However, lack of proportion may be an indication that, where there is some other potential reason for the payment, the payment comes from that alternative reason and not from the service.

That the service being provided does not need to be large can be seen from the judgment of Finlay J in Brocklesby v Merricks [1934] 18TC576. In this case the taxpayer had got a favourable contract because he had previously rendered voluntary services. Finlay J said (in a judgment approved by the Court of Appeal) at page 583:

‘It seems to me that it was a payment made to the appellant for services rendered. It is perfectly true that he did very little … but I cannot doubt that this was a contract for remuneration in respect of services rendered.’

Similarly in the case of Bradbury v Arnold [1957] 37TC665 Upjohn J said at page 669:

‘There is no doubt that a contract for services may, and clearly does, form a matter for assessment under [the sweep-up provisions] and not the less so that the services to be rendered are trivial or that they are to be rendered once and for all so that the remuneration may be regarded as a casual profit arising out of a single and isolated transaction.’

Upjohn J confirmed the point that, where the payment is large and the services trifling, the Tribunal may draw the inference that there was some other reason for payment:

‘It was submitted on behalf of Mr. Arnold, amongst other things, that any services of introduction of the kind rendered to Major Martineau by Mr. Arnold could not have been other than trifling and that a payment of £9,000 would not be attributable to such services. The Commissioners make no finding on that point, but I think … they must have accepted that view and I do not understand Counsel for the Crown seriously to challenge that.’

This shows the importance of establishing all the facts around the payment.