Is any relief available on income clawed back post cessation ?

Is any relief available on income clawed back...

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A client was in dispute with former business associates about taking a client of theirs with him when he parted company from them and moved to a new legal practice.  

While he was with those associates (until 2006) he was a sole trader.  Since parting company from them he has been a member of an LLP. 

They have decided to settle and a payment will be made by my client to his former business associates to remedy the situation, the payment being a proportion of the income earned by my client since he transferred the client away from his business associates.

The question is whether there tax relief available to my client on the payment.

It seems to me that s96 ITA 2007 does not apply, and that this is therefore a post-cessation expenditure in the absence of post-cessation income against which an offset could be made.

Or could one take the view that there hasn't in fact been a cessation of trade given that he was a sole trader solicitor and is remains a solicitor albeit through an LLP? 

It seems inequitable that he would have paid income tax on the income earned from the client but may not get tax relief on giving up a proportion of that income when paying it to his old business associates.

Can anyone provide any guidance or suggested means of obtaining tax relief on the payment that is going to be made ?

Thank you in advance for your assistance.

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By Exector
08th Mar 2012 15:44

Why a revenue business cost?

Isn't it effectively some form of damages paid to the former associate and therefore on capital account. The fact that it is computed by reference to income amounts does not necessarily make it a revenue business expense. (as various tax cases illustrate).

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