Abbott v Philbin (Inspector of Taxes): HL 21 Jun 1960

A company’s senior employees had been given an option to subscribe for its shares at the then current market price, the option being exercisable at any time within the next ten years. The employees were thus incentivised to increase the company’s prosperity. The option was non-transferable and would expire on the employee’s death or retirement.
Held: Income tax was chargeable on the realisable monetary value of the option at the date of its acquisition, rather than on the value realised when it was subsequently exercised.
Viscount Simonds said that the test was whether the chattel or right ‘was by its nature capable of being turned into money.’
Lord Radcliffe discussed employee benefits in the form of share options: ‘I think that the conferring of a right of this kind as an incident of service is a profit or perquisite which is taxable as such in the year of receipt, so long as the right itself can fairly be given a monetary value, and it is no more relevant for this purpose whether the option is exercised or not in that year, than it would be if the advantage received were in the form of some tangible form of commercial property.’
Lord Reid said: ‘I can sum up my view by saying that conditions and restrictions attached to or inherent in an option may affect its value, but are only relevant on the question whether the option is a perquisite if they would in law or in practice effectively prevent the holder of the option from doing anything when he gets it which would turn it to pecuniary account.’


Viscount Simonds, Lord Reid, Lord Radcliffe, Lord Keith of Avonholm, Lord Denning


[1960] UKHL 1, [1961] AC 352, [1960] UKHL TC – 39 – 82


Bailii, Bailii


Income Tax Act 1952 Sch E


England and Wales


CitedTennant v Smith (Surveyor of Taxes) HL 14-Mar-1892
A Montrose bank manager had been given free accommodation in a bank house which he was required to occupy.
Held: The Inland Revenue could not charge income tax on the value of the accommodation because the employee could not convert the . .

Cited by:

CitedGrays Timber Products Ltd v Revenue and Customs SC 3-Feb-2010
An assessment to income tax had been raised after the employee resold shares in the company issued through the employees’ share scheme at a price which the Revenue said was above the share value. The company appealed against a finding that tax was . .
CitedRevenue and Customs v Forde and McHugh Ltd SC 26-Feb-2014
The Court heard a number of appeals concerned with the interpretation of the phrase in section 6(1) of the Social Security Contributions and Benefits Act 1992, ‘[w]here in any tax week earnings are paid to or for the benefit of an earner’ It was . .
CitedShop Direct Group v Revenue and Customs SC 17-Feb-2016
The Court considered the interpretation of the sections which applied corporation tax to post-cessation receipts. Companies had received from the Inland Revenue substantial repayments of VAT together with interest. There had been reorganisations of . .
CitedUBS Ag and Another v Revenue and Customs SC 9-Mar-2016
UBS AG devised an employee bonus scheme to take advantage of the provisions of Chapter 2 of the 2003 Act, with the sole purpose other than tax avoidance, and such consequential advantages as would flow from tax avoidance. Several pre-ordained steps . .
CitedRFC 2012 Plc (Formerly The Rangers Football Club Plc) v Advocate General for Scotland SC 5-Jul-2017
The Court was asked whether an employee’s remuneration is taxable as his or her emoluments or earnings when it is paid to a third party in circumstances in which the employee had no prior entitlement to receive it himself or herself.
Held: The . .
Lists of cited by and citing cases may be incomplete.

Income Tax

Updated: 16 August 2022; Ref: scu.248537