Taxable compensation

The taxpayer who was in practice as a solicitor operated from an office on the projected route of the new Edinburgh tramway system.

He received a payment of £4 000 under the city's small business additional support scheme to compensate him for disruption caused by the construction of the tramway.

HMRC argued that the money was a revenue receipt of the practice. The fact the payment was unsolicited and made voluntarily was irrelevant.

The explanatory leaflet accompanying the payment referred to “business interests” and was made to compensate for potential business disruption. It was linked to the turnover of the business and should be taxed as such claimed the Revenue.

The taxpayer said the sum was a voluntary gift and recompense for inconvenience and losses which were not in the nature of income.

Nothing in the publication about the scheme referred to compensation for loss...