Moorthy v Revenue And Customs [2018] EWCA Civ 847

Appeal against a ruling that the Claimant's payment in relation to a settlement agreement fell within section 401(1)(a) of ITEPA 2003 and was thus taxable and against the decision that awards for injury to feelings are taxable. The appeal was allowed in relation to injury to feelings.

The Claimant received £200,000 after agreeing a settlement package with the employer. He claimed that the payment did not fall within section 401(1)(a) of ITEPA 2003 and so was not taxable. Both the FTT and UT disagreed and the UT also said that the Claimant could not claim that a part of the award was for injury to feelings which therefore was not taxable because of s406 ITEPA (read the FTT decision [here]() and the UT decision here. The Claimant appealed both decisions.

The Court of Appeal dismissed the first ground of appeal - it was beyond reasonable doubt that the FTT and the Upper Tribunal were both correct to hold that the entirety of the £200,000 payment to Mr Moorthy fell with section 401(1)(a) of ITEPA 2003. On any natural reading of the statutory language, the payment was received by him "directly or indirectly in consideration or in consequence of, or otherwise in connection with" the termination of his employment. However the court allowed the appeal in relation to injury to feelings, saying that to treat an award of damages for injured feelings, in respect of actionable discrimination on grounds of age, as falling within the exemption in section 406 would accord with the natural meaning of the language of the section, would provide parity of treatment with similar awards made in a continuing employment relationship, and would not be objectionable on policy grounds. It should be pointed out though, that, from 6 April 2018, injury to feelings are fully taxable because section 406 has now been amended by section 5(7) of the Finance (No 2) Act 2017.

Published: 23/04/2018 13:44

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