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K Moorthy v CRC, Court of Appeal, 20 April 2018
Payment made to employee on the termination of his employment
The taxpayer was made redundant in March 2010. He entered into a compromise agreement for a claim for unfair dismissal and unlawful age discrimination and received a statutory payment of £200 000 from which no tax was deducted. The employer treated the first £30 000 of the sum as exempt from tax under ITEPA 2003 s 403 and deducted tax from the balance.
The taxpayer claimed a repayment of the deduction saying the settlement should be tax-free because it related to injury of his feelings.
The First-tier Tribunal and Upper Tribunal said the payment fell within s 401 and that s 406 did not apply to remove it from the charge to tax. The taxpayer appealed.
Lord Justice Henderson in the Court of Appeal said both tribunals had been correct to say the payment fell within s...
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