Thornton v Revenue & Customs (Income tax – discovery) [2016] UKFTT 767 (TC) (16 November 2016)

Thornton v Revenue & Customs (Income tax – discovery) [2016] UKFTT 767 (TC) (16 November 2016)

The receipt of the funds falls to be regarded as a capital receipt in the hands of Mr Thornton because the payment was to make good the fall in capital value attributable to dilapidations, not to compensate for loss of rental income.

Citation
[2016] UKFTT 767
Parties
Appellant: James Allan Thornton; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
16 November 2016
Procedural Posture
Income Tax – Discovery / Appeal Against Closure Notice and Assessments
Outcome
Appeal allowed
Legal Topics
Income Tax, Discovery Assessments, Capital Vs Income Receipts, Dilapidations, Lease Settlements
Tax Law Income Tax Discovery Assessments Capital Vs Income Receipts Dilapidations Lease Settlements

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Parties

James Allan Thornton

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

Income Tax – Discovery / Appeal Against Closure Notice and Assessments

Legal Issues

  1. 1 Whether a settlement payment received by the appellant should be treated as a capital or income receipt for tax purposes

Ratio Decidendi

The receipt of the funds falls to be regarded as a capital receipt in the hands of Mr Thornton because the payment was to make good the fall in capital value attributable to dilapidations, not to compensate for loss of rental income.

Court Disposition

Appeal allowed

Orders

  • The settlement payment is to be treated as a capital receipt and not subject to income tax.