Moorthy v Revenue & Customs [2014] UKFTT 834 (TC) (21 August 2014)

Moorthy v Revenue & Customs [2014] UKFTT 834 (TC) (21 August 2014)

The entire £200,000 payment was made in connection with the termination of Mr Moorthy’s employment and is taxable under ITEPA s 401, subject only to the statutory £30,000 exemption, which is reduced to £19,360 due to a prior redundancy payment. There is no statutory basis for exempting a further £30,000 as...

Source-derived case information.

Citation
[2014] UKFTT 834 (TC)
Parties
Appellant: Krishna Moorthy; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
21 August 2014
Procedural Posture
Income Tax Appeal / First Tier Tribunal (tax) Decision
Outcome
Appeal dismissed in part; HMRC’s assessment upheld with adjustment
Legal Topics
Taxation of Termination Payments, Employment Discrimination, Income Tax (earnings and Pensions) Act 2003 (itepa), Redundancy Payments, Compromise Agreements, Injury to Feelings Awards
Tax Law Employment Law Taxation of Termination Payments Employment Discrimination Income Tax (earnings and Pensions) Act 2003 (itepa) Redundancy Payments Compromise Agreements Injury to Feelings Awards

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Parties

Krishna Moorthy

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

Income Tax Appeal / First Tier Tribunal (tax) Decision

Legal Issues

  1. 1 Whether a £200,000 termination payment under a compromise agreement is taxable under ITEPA s 401
  2. 2 Whether any part of the payment is exempt as compensation for discrimination or injury to feelings
  3. 3 Whether the statutory £30,000 exemption applies and how it is affected by a prior redundancy payment

Ratio Decidendi

The entire £200,000 payment was made in connection with the termination of Mr Moorthy’s employment and is taxable under ITEPA s 401, subject only to the statutory £30,000 exemption, which is reduced to £19,360 due to a prior redundancy payment. There is no statutory basis for exempting a further £30,000 as compensation for discrimination or injury to feelings in this context, nor for HMRC’s concession. The payment is taxable except for the £19,360 exemption.

Court Disposition

Appeal dismissed in part; HMRC’s assessment upheld with adjustment

Orders

  • The £200,000 payment is taxable under ITEPA s 401, subject to a £19,360 exemption due to prior redundancy payment.
  • No further exemption or concession applies for discrimination or injury to feelings.