BIM40140 - Receipts: compensation & damages: loss of office: exceptions

Exceptions to the rule

Before accepting that BIM40135 applies to compensation there are two factors that you may need to consider:

• The distinction between employment and trading income is not always so clear-cut. In circumstances that are close to the margin and where a trading income computation treatment has been accepted, you should critically examine a claim that the particular contract giving rise to the compensation escapes taxation by virtue of the employment rules.
• Where a professional person or firm is acting in a dual capacity for the person paying the compensation, for example, an accountant carrying out the statutory duties of auditor and also providing general accountancy services, the instruction at BIM40135 does not apply to that part of the compensation attributable to the loss of the accountancy work (see Ellis v Lucas [1966] 43TC276).