The right thing

The taxpayer a US national had been employed by a company in the UK for eight years. By 2004 her role had changed and realising she had done what had been required she resigned. This meant she forfeited any entitlement to redundancy payment and long-term incentive plan awards. There was no provision in her contract for any ex gratia payment so the company decided to make her one of £15 000 to compensate her for the loss of benefits and in recognition that she had done the 'right thing' by the company.

The payment was made into her American bank account and tax at the basic rate deducted from £120 000.

HMRC said that the payment was chargeable to tax as general income from employment under ITEPA 2003 s 62(2)(b). They amended the taxpayer's return and issued a determination on the company under...