Sole trader: costs of defending action taken by former employer
In P McMahon v HMRC (TC02799 – 2 August) an individual (M) had been employed as a recruitment consultant by a company (Q). In April 2007 he left Q and became self-employed. Subsequently Q began legal proceedings against him claiming that he had breached an undertaking not to contact or canvass any of Q’s clients. The proceedings were settled by a ‘Tomlin order’ under which M agreed to pay Q £100 000 in settlement of Q’s claims. In his 2007/08 tax return M claimed a deduction for this payment together with his legal costs. HMRC rejected the claim on the basis that the expenditure had not been wholly and exclusively incurred for the purpose of M’s business. The FTT dismissed M’s appeal. Judge Cannan held that the expenditure had a dual purpose ...
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Sole trader: costs of defending action taken by former employer
In P McMahon v HMRC (TC02799 – 2 August) an individual (M) had been employed as a recruitment consultant by a company (Q). In April 2007 he left Q and became self-employed. Subsequently Q began legal proceedings against him claiming that he had breached an undertaking not to contact or canvass any of Q’s clients. The proceedings were settled by a ‘Tomlin order’ under which M agreed to pay Q £100 000 in settlement of Q’s claims. In his 2007/08 tax return M claimed a deduction for this payment together with his legal costs. HMRC rejected the claim on the basis that the expenditure had not been wholly and exclusively incurred for the purpose of M’s business. The FTT dismissed M’s appeal. Judge Cannan held that the expenditure had a dual purpose ...
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