Global head of exotic interest rates

The taxpayer had been employed as French investment bank’s global head of exotic interest rate derivatives risk management.

He appealed against his unfair dismissal on 31 July 2008 having complained the company had promoted a French national in an act of discrimination.

The Employment Tribunal agreed and awarded compensation. The amount was reduced on appeal and the taxpayer had to pay his own legal costs as well as £66 000 of his former employer’s:  a total of £263 761.

The taxpayer claimed a deduction for the costs against his earnings for 2010/11. HMRC refused the claim issuing a closure notice under TMA 1970 s 28A and increasing his income tax liability by £49 136.

The First-tier Tribunal dismissed the taxpayer’s appeal on the basis the costs were not allowable under ITEPA 2003 s 336 which required that the costs should be paid “as holder...