SHIVANI MATHUR v Revenue & Customs (INCOME TAX - ITEPA 2003 section 401 - taxpayer received £6 million payment from former employer in settlement...) [2022] UKFTT 88 (TC) (09 March 2022)

SHIVANI MATHUR v Revenue & Customs (INCOME TAX - ITEPA 2003 section 401 - taxpayer received £6 million payment from former employer in settlement...) [2022] UKFTT 88 (TC) (09 March 2022)

The Tribunal held that the £6 million settlement payment was received in connection with the termination of Ms Mathur's employment within the meaning of s401 ITEPA 2003. The payment settled claims arising from both pre-termination conduct and the termination itself, but the statutory language is broad and captures such global settlements. Only a limited portion of the payment (£44,000), corresponding to the upper Vento band for injury to feelings, could be exempt under s406 ITEPA. The remainder was taxable as employment income.

Citation
[2022] UKFTT 88
Parties
Appellant: Shivani Mathur; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
09 March 2022
Procedural Posture
First Tier Tribunal (tax) Appeal / Final Judgment on Appeal Against HMRC Closure Notice Regarding Tax Treatment of Settlement Payment
Outcome
Appeal dismissed
Legal Topics
Income Tax (earnings and Pensions) Act 2003 S401, Taxation of Settlement Payments, Employment Termination, Discrimination Claims, Apportionment of Damages, Exception for Injury to Feelings (s406 Itepa)
Tax Law Employment Law Income Tax (earnings and Pensions) Act 2003 S401 Taxation of Settlement Payments Employment Termination Discrimination Claims Apportionment of Damages Exception for Injury to Feelings (s406 Itepa)

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Parties

Shivani Mathur

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

First Tier Tribunal (tax) Appeal / Final Judgment on Appeal Against HMRC Closure Notice Regarding Tax Treatment of Settlement Payment

Legal Issues

  1. 1 Whether the £6 million settlement payment received by Ms Mathur from her former employer was taxable under s401 ITEPA 2003 as a payment in connection with the termination of employment
  2. 2 Whether any part of the settlement payment was exempt from tax under s406 ITEPA as compensation for injury to feelings

Ratio Decidendi

The Tribunal held that the £6 million settlement payment was received in connection with the termination of Ms Mathur's employment within the meaning of s401 ITEPA 2003. The payment settled claims arising from both pre-termination conduct and the termination itself, but the statutory language is broad and captures such global settlements. Only a limited portion of the payment (£44,000), corresponding to the upper Vento band for injury to feelings, could be exempt under s406 ITEPA. The remainder was taxable as employment income.

Court Disposition

Appeal dismissed

Orders

  • The appeal is dismissed. The closure notice and HMRC's amendment to Ms Mathur's tax return stand, with only £44,000 of the settlement payment exempt under s406 ITEPA as compensation for injury to feelings.