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Compensation settlement receipt was revenue in nature

By Mark McLaughlin, August 2021

An amount of compensation received in respect of a settlement agreement was revenue and not capital in nature, as it had been paid to fill a ‘hole’ in the appellant company’s profits. 

The appellant company ceased trading on 31 December 2015. An investigation of earlier irregularities by the company’s then finance manager revealed that she had been embezzling money from the appellant for a number of years. It was estimated that the amounts embezzled from 2004 to 2012 were £773,701 in total. The appellant’s loss in that period, after corporation tax, was £556,380. 

From 2001, a consultant accountant (DE) had been engaged by the appellant. From 2007 to 2012, accountants (ABC) were engaged by the appellant. ABC audited the appellant’s accounts for the

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