The claimant resigned from her employment with the respondent company, and was found by the Employment Tribunal (ET) to have been constructively dismissed.
The ET made various awards to the claimant, including a compensation award of £10,000 for injury to feelings, which it grossed up to £16,666 on the understanding that it would be liable to income tax at 40%. The company appealed, on the ground that an award for injury to feelings is exempt from tax.
The Employment Appeal Tribunal (EAT) noted an earlier EAT decision in Orthet v Vince-Cain [2005] ICR 324, in which it was decided that an award of damages for injury to feelings was not taxable. However, the EAT in the present case noted that in Orthet the tribunal’s attention was not drawn to Horner v Hasted [1995] STC 766 (which considered the tax treatment of a termination payment made on account of mental disability).
