The latest PAYE, RTI and employment taxes updates including changes to the rules on intermediaries by our resident expert, Lesley Fidler, employment tax director at Baker Tilly
Case report: Compensation or earnings at stake in Mr A v HMRC
The First Tier Tax Tribunal (FTT) decision of Mr A v HMRC [2015] UKFTT 189 (TC) provides useful comment on the taxation of compensation payments and references to other recent cases dealing with these issues.
Here, HMRC was unsuccessful in its claim that £600,000, paid to Mr A as part of settlement under a compromise agreement concerning his claim for racial discrimination, should be taxed as general earnings.
The Tribunal was clear that there is no support in principle or authority for HMRC’s argument that damages payments calculated by reference to loss of earnings should be taxable under s62, Income Tax (Earnings and Pensions) Act 2003 because earnings are involved. Instead, it was accepted that a payment settling a claim should be treated for tax purposes in the same way as if the claim itself had been successful.
