Lease compensation

My client had a five-year lease on business premises which is within the Landlord and Tenant Act 1987. At the end of the lease the landlord refused to grant a further lease and my client was faced with taking the matter to court at some expense to himself and the landlord.

He was assured that the outcome of the court hearing would be an award of twice the rateable value as compensation for the landlord not granting a further lease. Our client approached the landlord and he has agreed to pay twice the rateable value (£26 000) rather than both parties incurring legal costs.

My question is whether the receipt of the £26 000 is taxable in my client’s hands?

Second would it have made any difference if the matter had gone to court and the compensation was awarded after a court hearing. At the same time...