Dismissal deduction

I have a limited company client who was recently taken to court regarding an unfair dismissal claim and unfortunately lost the case.

The company had to pay a substantial amount to the claimant and I wonder whether this may be included in the company accounts as a deduction (revenue item) or whether this should be treated as capital.

In the case ofWilson v Clayton [2005] STC 157 compensation for unfair dismissal was held to be within the £30 000 threshold i.e. it was treated as employment income in the hands of the recipient.

This suggests to us that payment is allowable as a deduction in the profit and loss account.

As the dismissal was wholly and exclusively for the purposes of the trade – i.e. the employee was not fulfilling his role within the organisation – this would seem to point to a legitimate deduction.

It...