Investment refunded

The taxpayer had worked at Morrison Construction since 1996. The firm acquired the assets of Richardson Ltd in 2005 and the taxpayer was appointed sales director of that company.

He had been invited to enter an enterprise management incentive (EMI) scheme as an incentive to move to his new position; he invested £30 000 to join. It was understood the sum would be refunded to him should he leave the company.

The taxpayer decided to leave the firm in December 2007. He received a £75 000 compensation payment under a compromise agreement; £30 000 was tax exempt under ITEPA 2003 s 401 to s 404A and he believed another £30 000 represented repayment of his investment in the EMI and should be free of tax.

HMRC disagreed saying there was nothing in the compromise agreement to suggest £30 000 related to the taxpayer’s EMI investment.

The First-tier...