Wilkinson v Revenue & Customs (INCOME TAX - compensation paid to a person carrying on a property rental business) [2020] UKFTT 362 (TC) (11 September 2020)

Wilkinson v Revenue & Customs (INCOME TAX - compensation paid to a person carrying on a property rental business) [2020] UKFTT 362 (TC) (11 September 2020)

The compensation was paid to reimburse the appellant for revenue expenses incurred under the mis-sold swap, to the extent they exceeded what would have been incurred under the alternative product. Therefore, the basic redress element is taxable as income. The interest element is properly characterised as interest and is also taxable as income.

Citation
[2020] UKFTT 362 (TC)
Parties
Appellant: Mr Darren Wilkinson; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
11 September 2020
Procedural Posture
Income Tax Appeal / First Tier Tribunal (tax) Decision on Appeal Against Amendment to Self Assessment Tax Return
Outcome
Appeal dismissed
Legal Topics
Income Tax, Compensation Payments, Property Rental Business, Interest Rate Swap, Mis Selling, Revenue Vs Capital Receipts
Tax Law Income Tax Compensation Payments Property Rental Business Interest Rate Swap Mis Selling Revenue Vs Capital Receipts

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Parties

Mr Darren Wilkinson

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Income Tax Appeal / First Tier Tribunal (tax) Decision on Appeal Against Amendment to Self Assessment Tax Return

Legal Issues

  1. 1 Whether compensation paid for mis-sold interest rate swap to a property rental business is taxable as income or capital
  2. 2 Whether the 'interest' element of compensation is properly taxable as interest income

Ratio Decidendi

The compensation was paid to reimburse the appellant for revenue expenses incurred under the mis-sold swap, to the extent they exceeded what would have been incurred under the alternative product. Therefore, the basic redress element is taxable as income. The interest element is properly characterised as interest and is also taxable as income.

Court Disposition

Appeal dismissed

Orders

  • The amendment to the appellant’s self-assessment tax return stands; the compensation is taxable as income.