Moorthy v The Commissioners for HMRC

Moorthy v The Commissioners for HMRC

Compensation for injury to feelings in actionable age discrimination claims falls within the exemption in section 406 of ITEPA 2003 and is not taxable as employment income; the remainder of the settlement sum is taxable under section 401 ITEPA 2003.

Parties
Appellant: Krishna Moorthy; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
England and Wales
Judgment Date
20 April 2018
Procedural Posture
Civil Appeal / Court of Appeal Judgment
Outcome
Appeal allowed in part; exemption issue decided in favour of appellant, taxability issue decided in favour of respondent.
Legal Topics
Income Tax on Termination Payments, Exemption for Injury to Feelings, Age Discrimination, Compromise Agreements, Statutory Interpretation
Tax Law Employment Law Equality Law Income Tax on Termination Payments Exemption for Injury to Feelings Age Discrimination Compromise Agreements Statutory Interpretation

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 5 Authorities cited 19 Party arguments 2 Amounts and remedies 5
Sign in to unlock

Parties

Krishna Moorthy

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Civil Appeal / Court of Appeal Judgment

Legal Issues

  1. 1 Whether compensation for loss of office and employment paid on termination is taxable under Chapter 3 of Part 3 of ITEPA 2003
  2. 2 Whether compensation for injury to feelings in an age discrimination claim is exempt from income tax under section 406 of ITEPA 2003
  3. 3 Whether HMRC's concession regarding £30,000 exemption was correct

Ratio Decidendi

Compensation for injury to feelings in actionable age discrimination claims falls within the exemption in section 406 of ITEPA 2003 and is not taxable as employment income; the remainder of the settlement sum is taxable under section 401 ITEPA 2003.

Court Disposition

Appeal allowed in part; exemption issue decided in favour of appellant, taxability issue decided in favour of respondent.

Orders

  • Declare that £30,000 of the £200,000 paid to Mr Moorthy is exempt from income tax under section 406 of ITEPA 2003.
  • Dismiss appeal on grounds 1 and 4.