In an important case which illustrates the financial pitfalls of leaving employment, a senior worker who received £200,000 in settlement of age discrimination and unfair dismissal claims has been landed with an unwelcome income tax bill.
The man, aged in his 60s, was a long-serving executive director of an engineering company but was made redundant from his £111,000-a-year job after failing to achieve promotion to vice-president. He received statutory redundancy pay of £10,640 but subsequently launched proceedings before an Employment Tribunal.
Those proceedings were settled by his former employers for £200,000. The payment was made without any admission of liability and was expressed to be ‘ex gratia’ and ‘by way of compensation for loss of office and employment’. The man nevertheless argued that the money should be viewed as compensation for discrimination and injured feelings and was thus not taxable.
In dismissing ...