Compensation exemption did not apply: The one thing about tax that ‘everybody knows’ is that a tax-free payment of up to £30 000 can be paid as compensation for loss of office. As Simrajsar Ltd and another v HMRC [2024] UKFTT 1072 (TC) (28 November) demonstrates this is far from the truth. The five individuals involved were all directors of companies closely connected with an LLP which was a promoter of tax planning arrangements: all five of them were members of the LLP. Each was paid exactly £30 000 ‘compensation.’ There were no calculations to support that figure. The FTT was of the view that this supported HMRC’s argument that the payments were not compensation for loss of office particularly as the individuals had not in fact suffered any financial loss from the termination of their contracts. They had voluntarily resigned and had in any case not been...
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Compensation exemption did not apply: The one thing about tax that ‘everybody knows’ is that a tax-free payment of up to £30 000 can be paid as compensation for loss of office. As Simrajsar Ltd and another v HMRC [2024] UKFTT 1072 (TC) (28 November) demonstrates this is far from the truth. The five individuals involved were all directors of companies closely connected with an LLP which was a promoter of tax planning arrangements: all five of them were members of the LLP. Each was paid exactly £30 000 ‘compensation.’ There were no calculations to support that figure. The FTT was of the view that this supported HMRC’s argument that the payments were not compensation for loss of office particularly as the individuals had not in fact suffered any financial loss from the termination of their contracts. They had voluntarily resigned and had in any case not been...
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