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Bonus scheme payments were general earnings and not termination payments

By Mark McLaughlin, November 2020

Bonus scheme payments received by an individual under a compromise agreement with his former employer were taxable as general earnings and were not termination payments for tax purposes. 

The Appellant was employed by a large international bank between November 2010 and July 2012, when the employment was terminated by mutual agreement. The appellant received guaranteed bonus payments under a compromise agreement with his employer. He treated the bonus payments as termination payments for tax purposes. 

Following an enquiry into the appellant’s self-assessment return for the tax year 2014/15, HM Revenue and Customs (HMRC) issued closure notices for 2014/15, 2015/16 and 2016/17. The appellant appealed. His main contention was that the bonus payments received under the compromise agreement were termination payments within

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