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Where Taxpayers and Advisers Meet

Tax on compensation payment

Yiannis17
Posts: 72
Joined: Wed Aug 06, 2008 3:43 pm

Tax on compensation payment

Postby Yiannis17 » Tue Aug 20, 2019 3:36 pm

Afternoon

I have a complicated situation here whereby someone became non resident for about 4 tax years from 2014 and worked abroad for a UK company in the middle east. He was paid by the UK company into his bank account in the middle east. The duties where always performed abroad.

However, in one of the tax years, 2016, he feel out with his employer, and went to court. He won the case and was compensated by the UK company and he was paid into his UK bank account. The compensation relates to his employment whilst abroad but HMRC now have made an assessment on his stating there is tax due on this compensation.

I am slightly lost as how to handle this.

Jholm
Posts: 103
Joined: Mon Mar 11, 2019 4:22 pm

Re: Tax on compensation payment

Postby Jholm » Tue Aug 20, 2019 4:42 pm

The first thing you need to do is establish the facts in great detail...

What exactly is the compensation for? You say it relates to his employment but how so? If for example, it is for loss of earnings, then yes it would be taxable. If it was for injury whilst working, then no.

There are lots of facts to be considered but on first glance, it sounds like HMRC know something you don't (or at least have not stated here).


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