UKFTT 278 (2009) Clinton v HMRC

Termination payment - Taxpayer won

Case Summary:

Dr Clinton’s job changed and she wrote to her employer to say she had been constructively dismissed , saying, “As you are aware, my contractual notice period is three months, I therefore expect to receive, within seven days, settlement of my final three months salary and confirmation that my pension contributions and private health premiums will be paid.”

The company said she had resigned but as a goodwill gesture offered her three months pay in a lump sum from which taxes etc would be deducted. She accepted this and the company paid over to her a lump sum net of PAYE. In her SA return she claimed s403 relief and so HMRC pursued her for the tax.

The Tribunal agreed with Dr Clinton’s submissions that the payment was made either on an ex gratia basis or to settle Dr Clinton’s common law claim for constructive dismissal.  As such the termination payment was not a contractual entitlement and was therefore covered by s403 relief.