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K Harrison (TC2397)
The taxpayer was employed by the Financial Ombudsman Service (FOS) as an adjudicator. His contract was terminated in February 2006 after a disciplinary hearing.
The FOS made him a lump sum payment of £4 135 from which the organisation deducted tax. The payment was the equivalent of eight weeks’ salary. In the view of the FOS it was a payment in lieu of notice and a contractual entitlement.
The taxpayer claimed in April 2008 repayment of the tax deducted on the ground payment was not made under the terms of his contract. Rather it was a termination payment and not taxable because it was less than £30 000.
HMRC refused the claim saying the payment was made under the terms of his employment contract.
The taxpayer argued he had been dismissed with no written notice given. There was a contractual entitlement for a payment...
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