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The taxpayer was employed by a company as financial controller.
He was told he was to be made redundant in October 2006. The letter advised that he would be paid ‘November salary and December salary in gross (not subject to tax or NIC) as a full and final settlement for loss of office’.
The company went into administration in December 2006 which resulted in the taxpayer not receiving payment for that month.
In addition the November payment was made after payment of income tax and National Insurance. The administrator KPMG wrote to the taxpayer suggesting he contact HMRC for a refund of the deductions.
The Revenue said the November payment was taxable because it was a payment to which the taxpayer was entitled under his contract of employment. The employer’s letter could change the legal...
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