P Manduca v HMRC

In P Manduca v HMRC (TC02648 – 25 April) a hedge fund manager (M) took up employment with a Luxembourg bank (D). D’s directors agreed to pay M an ‘investment bonus’ as consideration for M introducing certain business to D. However in November 2001 D made M redundant without paying him the promised ‘investment bonus’. M began legal action against D. The action was settled out of court and D agreed to pay M compensation for the loss of the ‘investment bonus’ (in addition to the redundancy payment which M had already received). In his 2002/03 return M treated the compensation payment as a capital receipt. Following an enquiry HMRC issued a closure notice treating it as chargeable to income tax (under Schedule Case VI under the legislation then in force). The FTT dismissed M’s appeal holding...