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loyalty in the future. By ITEPA section 323 replacing a previous concession27 an award in the form of a tangible article or shares in the employing company is tax-free if the cost is reasonable, ie it does not exceed £20 per year of service. This limit does not appear to apply when the employee is leaving the employment. |
None of these cases appears actually to turn on the question of payment for past services but the payments must have escaped tax had the point not been accepted.28 The fact that past consideration is no consideration is irrelevant since the test is one of causation and not of consideration. The true line seems to be drawn not between services future and services past, but between a transfer caused by services and one caused by something else, eg a gift for personal reasons. The fact that the service is past is only one factor in enabling this line to be drawn.29 In Moore v Griffiths30 the fact that the payment was not known about until after the services had been rendered tended to show that it was a testimonial, and so not taxable. |
14A.1.6 Capital Payments |
A few dicta suggest that payments can escape ITEPA section 62 if they are capital payments.31 These dicta are unsound if they mean that a payment made in return for services can escape section 62 because of its capital nature. In no case has the classification of a payment as capital been the prime reason for holding that the payment is not taxable; in a few cases a payment which has escaped tax because it was not made in return for services has been conveniently but irrelevantly (or even inaccurately) described as capital sum.32 The description ‘capital’ is therefore best regarded simply as a convenient label for certain types of non-emoluments.33 |