Lints
| Jurisdiction | UK Non-devolved |
| Judgment Date | 16 July 2012 |
| Neutral Citation | [2012] UKFTT 491 (TC) |
| Date | 16 July 2012 |
| Court | First Tier Tribunal (Tax Chamber) |
[2012] UKFTT 491 (TC)
Judge Kenneth Mure, QC, Scott A Rae, LLB, WS
The Appellant appeared in person
Mr William Kelly appeared for the Respondents
Income tax - calculation of business profits - whether compensation payment taxable as income - yes - appeal dismissed
The First-tier Tribunal decided that a compensation payment made to a taxpayer as part of a support scheme for businesses, including that of the taxpayer, that could be disrupted by a tramway construction project, was a surrogatum for business turnover. Thus, the payment should be included as a taxable income of the taxpayer's business for the relevant year.
The taxpayer appealed against the HMRC's view that the payment of £4,000 to him in terms of a small business additional support scheme ("the scheme") was to be included as taxable income of his business for the year 2008-09.
The taxpayer's offices were originally on the projected route of a new tramway system which was being promoted by a company ("TIE"). TIE publicised the scheme to support the interests of businesses affected by the construction of the tramway. The taxpayer applied in terms of the scheme and received a payment of £4,000 during the year 2008-09.
HMRC contended that recompense for services or for loss of profit would indicate a revenue and, hence, taxable receipt. The fact of the payment's being unsolicited and voluntary did not preclude a tax charge. The payment was made as a result of a claim made by the taxpayer. TIE's motive for the payment was to compensate for potential business disruption and, thus, it represented a taxable receipt.
The taxpayer contended that the receipt represented a voluntary gift and recompense for inconvenience and losses not of an income nature. The publication circulated about the scheme had been delivered to his office unsolicited. Nowhere was it stated that the payment was to compensate for loss of business. There was no requirement on him to show trading difficulties or evidence of loss of profit.
Whether the payment of £4,000 to the taxpayer in terms of the scheme should be included as taxable income of his business for the year 2008-09.
Held, dismissing the taxpayer's appeal:
The Tribunal decided that in determining whether the compensation payment of £4,000 was taxable as income, it had to determine for what it was the surrogatum. The mere fact of the payments being made once and for all, did not preclude its being a revenue receipt taxable as trading profit. Neither did the absence of any pre-existing or continuing relationship between the taxpayer and TIE.
Here, the inclusion within the scheme of businesses, but not private individuals, suggested that it was a surrogatum for business turnover. The nature of the works carried out by TIE was liable to affect the "footfall" at commercial premises generally in the vicinity. The expense of remedying the disruption complained of by the taxpayer would be a revenue item. Increased costs of cleaning and general maintenance were revenue in nature. Therefore, the Tribunal concluded that the £4,000 payment should be included as a taxable receipt of the taxpayer's business.
1.This Appeal relates to whether a payment of £4,000 to the taxpayer in terms of the Edinburgh Small Business Additional Support Scheme ("the Scheme") falls to be included as taxable income of his business for the Year 2008/09. This Scheme is operated by Transport Initiatives Edinburgh Limited ("TIE") to support the interests of businesses affected by the construction of the Edinburgh tramway.
2.The Appellant, the taxpayer, was at the material time in practice on his own account as a solicitor, trading as Lints Partnership. One of the premises from which he operated was at 8-11 Crighton Place...
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