L v Revenue and Customs (INCOME TAX - relevant amount of settlement payment received from previous employer which is assessable to income tax) [2024] UKFTT 1044 (TC) (18 November 2024)

L v Revenue and Customs (INCOME TAX - relevant amount of settlement payment received from previous employer which is assessable to income tax) [2024] UKFTT 1044 (TC) (18 November 2024)

Settlement payments for in-work discrimination that deprive an employee of the opportunity to perform their full role are not taxable as earnings under section 62 ITEPA, as they are not rewards for services rendered. Deferred compensation, incentive awards, and equal pay settlements are taxable as earnings. Payments for injury to feelings are not taxable.

Citation
[2024] UKFTT 1044 (TC)
Parties
Appellant: L; Respondents: THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS
Jurisdiction
United Kingdom
Judgment Date
18 November 2024
Procedural Posture
Income Tax Appeal / First Tier Tribunal Judgment
Outcome
Appeal allowed in part
Legal Topics
Income Tax on Settlement Payments, Employment Discrimination, Equal Pay, Taxation of Damages, Termination Payments
Tax Law Employment Law Equality Law Income Tax on Settlement Payments Employment Discrimination Equal Pay Taxation of Damages Termination Payments

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Parties

L

Appellant

THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS

Respondents

Procedural Posture

Income Tax Appeal / First Tier Tribunal Judgment

Legal Issues

  1. 1 Whether settlement payments for in-work discrimination are taxable as earnings under section 62 ITEPA
  2. 2 Taxability of deferred compensation and incentive awards
  3. 3 Tax treatment of payments for injury to feelings

Ratio Decidendi

Settlement payments for in-work discrimination that deprive an employee of the opportunity to perform their full role are not taxable as earnings under section 62 ITEPA, as they are not rewards for services rendered. Deferred compensation, incentive awards, and equal pay settlements are taxable as earnings. Payments for injury to feelings are not taxable.

Court Disposition

Appeal allowed in part

Orders

  • Amendment to Appellant's self-assessment for the tax year ended 5 April 2015 is overstated; only deferred compensation, incentive awards, and equal pay settlements are taxable as earnings; payments for in-work discrimination and injury to feelings are not taxable as earnings.