Legacy taxed as employment income?

[anon123]

A legacy does not give rise to an income tax liability because it is a payment out of capital. Is this an absolute or are there exceptions to this rule?

If the controlling shareholder of a company leaves a legacy to an employee of that company under the terms of his will can this be taxed on the employee as earnings under section 62 ITEPA? The payment is conditional on being an employee and is in recognition of many years service. It is noted that taxable earnings may be paid by someone other than the employer.

Any thoughts?

[maths]

The payment is conditional on being an employee and is in recognition of many years service.

Tricky; feels more like earnings than a gift.

To qualify as a gift it would I think be preferable for the employee condition to be removed and any expression restricted to the chap's personal qualities.

I give to Tom Smith £X a long standing friend and loyal business colleague.

[AvocadoK]

I agree with 'tricky.' It does feel like earnings in the sense that the payment could be interpreted as a reward for services.

But s9(2) ITEPA says that for a payment earnings, it must be "from" an employment. I don't think you could say that a legacy was "from" an employment.

AK