The Tax Tribunal's decision in Campus Living Villages UK Ltd
v The Commissioners for Her Majesty's Revenue and Customs &
Joanna A Sexton illustrated the importance of specifically
referencing the inclusion of Statutory Maternity Pay in a
Ms Sexton was employed by Campus Living Villages (Campus Living)
as its Head of Finance and was made redundant, whilst she was
pregnant. She claimed unfair dismissal and pregnancy discrimination
and her claims were settled by way of a COT3 agreement, following
conciliation by ACAS. As she was still employed by Campus Living
within 11 weeks of her expected week of childbirth, Ms Sexton was
entitled to receive Statutory Maternity Pay (SMP) from Campus
Living, even though she was no longer going to be employed by them
during her maternity leave. Campus Living thought they had dealt
with this entitlement to SMP by agreeing to pay Ms Sexton
£60,000 in "full and final settlement of all her
claims". This clearly meant, thought Campus Living, that Ms
Sexton's rights to SMP had been dealt with.
Despite this, Ms Sexton then complained to HMRC (the arbiters of
SMP) that she had not received her SMP. This was worth over
£42,000 (as her pay during the reference period to calculate
SMP had been enhanced by the receipt of a bonus during that time).
HMRC upheld her complaint and stated that she should be paid her
SMP separately because it hadn't been included in the
Campus Living then appealed to the Tax Tribunal (where decisions
of HMRC are appealed to).
What did the Tax Tribunal Decide?
Could a bonus be 'earnings' when calculating
SMP, meaning it is taken into account in working out what SMP
This had already been presumed to be the case by HMRC, but the
Tax Tribunal re-confirmed this. If a bonus falls within the
reference period for calculating SMP (normally the 8 weeks
immediately preceding the 14th week before the week that childbirth
is expected (known as the "EWC")), then it counts.
The Tax Tribunal said that there was no requirement that pay
during the 8 week calculation period had to be 'normal' or
'usual' pay, and that irregular or one-off payments counted
towards the employee's earnings for SMP calculation
Could Ms Sexton recover SMP even though she'd signed
The Tax Tribunal confirmed that an employee has an absolute
right to receive SMP and that this right cannot be contracted out
of. To settle the claim, Campus Living would have to show that it
had specifically paid Ms Sexton's SMP but the Tax Tribunal was
clear that Ms Sexton's entitlement to SMP had not, in fact,
When deciding that the SMP payment had not been included within
the terms of the settlement, the Tax Tribunal took into account the
fact that COT3 stated that all the payments would not attract
National Insurance, when SMP is in fact subject to both tax and
But ACAS signed it all off?
The Tax Tribunal said that it was 'unfortunate' that the
conciliation officer had not advised the parties correctly but said
that ACAS's mistakes could not affect HMRC's correct
application of the law.
Remember that when one-off payments are paid within the SMP
calculation reference period, they will be taken into consideration
when calculating the level of the employee's earnings for
When settling a claim, make sure that
any SMP payment is clearly labelled in the agreement and that it is
stated to be subject to tax and National Insurance.
SMP can be paid as a lump sum to the
employee, as long as the rules for paying National Insurance
contributions are obeyed.
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