Terminator 2

Keith Gordon looks at a case which considers the tax treatment of payments made to terminate a commercial contract

Although always a business risk, the current Coronavirus crisis is likely to have caused (or will lead to) the early termination of many commercial relationships. In such cases, the terminator might well – for a variety of reasons, whether contractual or out of goodwill – make a payment to the former supplier. The question that will then have to be considered is the tax treatment of such a payment. This question lay at the heart of the recent case of Looney v HMRC [2020] UKUT 119 (TCC).