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PILONS are taxable

09 May 2013
Issue: 4402 / Categories: Tax cases , Employees , Income Tax

S Manley (TC2517)

The taxpayer received payments from his employer in respect of termination of employment. He received a payment of £38,522, under a compromise agreement in lieu of notice, which was subjected to tax and National Insurance (NI).

He received another payment for the same amount, described by the employer as “ex gratia” and made subject to tax and NI.

He submitted his self assessment return to claim the first £30,000 of the total payments should be tax-free because he had been made redundant. HMRC disagreed, saying the payments were in lieu of notice and he was contractually entitled to them.

The First-tier Tribunal said the compromise agreement did not supersede the taxpayer’s contract of employment but had to be read with it.

The employer was contracted to make the payments to the taxpayer as part of his remuneration package. The compromise agreement made it clear the payments were taxable.

The taxpayer’s appeal was dismissed.

Issue: 4402 / Categories: Tax cases , Employees , Income Tax
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