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K Moorthy (TC3952)
The taxpayer became redundant in March 2010. He believed his former employer had discriminated against him on grounds of age and took steps to take his case to an employment tribunal.
The two parties engaged in mediation in January 2011 resulting in the company handing the taxpayer an ex gratia sum of £200 000 as compensation for loss of office and employment.
The full amount was paid in 2010/11: £30 000 without deduction of income tax as per the compensation agreement and the rest subjected to 20% tax.
The taxpayer included the full amount in his return stating £34 000 tax had been deducted for which he claimed a refund believing the full £200 000 should have been tax-free.
HMRC offered to treat £60 000 – the first £30 000 plus an additional and equal amount – as exempt by “concession and in order...
