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Philip McMahon (TC2799)
The taxpayer took up employment with recruitment consultant Q in 2003. He left in April 2007 to form his own consultancy.
Q began legal proceedings against him in June 2007 saying he had breached an agreement not to poach its clients.
A settlement was reached by a Tomlin order under which the taxpayer paid Q £100 000. He claimed relief on the settlement and on legal costs related to the proceedings saying the amounts were incurred wholly and exclusively for the purposes of his trade (ITTOIA 2005 s 34).
HMRC refused the claim and argued that at least part of the sums paid by the taxpayer were the result of his breach of contract meaning there was duality of purpose.
The taxpayer appealed contending that the matters in dispute were outside his employment contract and directly connected to his business.
The First-tier Tribunal accepted that...
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