In a ruling which strengthens the financial position of workplace whistleblowers, a woman has successfully argued that she should not have to pay tax on the first £30,000 of an interim award made by an Employment Tribunal (ET).
The woman claimed that she had been summarily dismissed for making protected disclosures. Pending the hearing of her case, an ET had made an interim award which had the effect of keeping alive her employment contract and requiring her former employers to continue paying her salary.
HM Revenue and Customs argued that the money she received pursuant to the award should be taxed in the ordinary way as an emolument of her employment. However, the woman’s lawyers submitted that, by virtue of Section 403 of the Income Tax (Earnings and Pensions) Act 2003, the first £30,000 she received should be treated as tax exempt.
In upholding the woman’s appeal, the First-tier Tribunal noted that, as a matter of law, it was clear that her employment had come to an end when she was dismissed. The interim award did not have the effect of reinstating her employment and the money subsequently paid to her had been received in consequence of, or in connection with, the termination of her employment. That money was therefore taxable only to the extent that it exceeded £30,000.