In Ismail G Essack v HMRC (TC03297 – 7 February 2014) the issue was whether a payment made to an employee was taxable as a capital gain or as employment income.
Ignition (Mr Essack’s employer) was acquired by another company in 2007 and the shareholder agreement referred to an employee share option plan. In 2008 a senior manager of Ignition referred again to the company’s promise to issue shares to key employees.
In 2009 Mr Essack decided to leave Ignition and a compromise agreement provided for the payment by Ignition to Mr Essack of £200 000 as ‘compensation for loss of employment’. A concomitant letter referred to the payment being partly compensation for Mr Essack’s share entitlement which had never materialised.
The tribunal found that Mr Essack had not acquired any right to shares in Ignition adding that an unenforceable promise could not be an...
