Wood v Revenue & Customs [2010] UKFTT 288 (TC) (25 June 2010)

Wood v Revenue & Customs [2010] UKFTT 288 (TC) (25 June 2010)

The payment to the appellant was made in settlement of prospective claims under a Compromise Agreement, not as contractual earnings or commission, and thus qualifies as a termination payment under Section 401 ITEPA 2003, entitling the appellant to the £30,000 exemption from income tax.

Citation
[2010] UKFTT 288
Parties
Appellant: N J Wood; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
25 June 2010
Procedural Posture
Appeal / First Tier Tribunal (tax) Decision
Outcome
Appeal allowed
Legal Topics
Income Tax, Termination Payments, Compromise Agreements, Tax Exemptions
Tax Law Employment Law Income Tax Termination Payments Compromise Agreements Tax Exemptions

Case Brief

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Parties

N J Wood

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Appeal / First Tier Tribunal (tax) Decision

Legal Issues

  1. 1 Whether the termination payment to the appellant is taxable as earnings or qualifies as a tax-free lump sum under ITEPA 2003

Ratio Decidendi

The payment to the appellant was made in settlement of prospective claims under a Compromise Agreement, not as contractual earnings or commission, and thus qualifies as a termination payment under Section 401 ITEPA 2003, entitling the appellant to the £30,000 exemption from income tax.

Court Disposition

Appeal allowed

Orders

  • HMRC to amend the self assessment form to allow £30,000 of the £37,424 to be exempt from tax and the remaining £7,424 to be taxable.