Adjusting an award so that the claimant retains the intended net sum after tax. British Transport Commission v Gourley; Hall v Durham County Council and ors.
Damages; wrongful dismissal; taxation; grossing up. The QBD applied the Gourley principle to damages for wrongful dismissal of a senior executive. The employee's liability to income tax on the award was not too remote to be taken into account when estimating his actual loss, and the damages themselves were taxable in his hands. It followed that the court was required to estimate the net sum the employee would have received after deduction of income tax from his gross income, and then to gross up that net figure to produce a sum which, after the tax payable on the award, would leave him with the intended net compensation. Shove is the leading authority in the employment context for grossing up calculations where the compensatory or damages award exceeds the £30,000 tax-free threshold. [Summary not yet checked against the judgment.]
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Remedies; grossing up; correct methodology. The tribunal erred by adding tax on top of the award it intended to make, producing a windfall. Langstaff P confirmed the correct approach: first determine the net figure the tribunal intends the claimant to receive; then calculate the gross pre-tax sum which, when tax is deducted at the applicable rate(s), yields that net figure. Grossing up does not mean adding a tax sum to an already-intended award, it means working backwards from the intended net to the necessary gross. [Summary not yet checked against the judgment.]
Remedies; grossing up; foreign tax. The employer appealed a compensatory award grossed up under UK tax law, arguing that US law was the proper law under the UK-US Double Taxation Convention 2001. The EAT rejected the appeal. The employer had refused to cooperate in instructing a joint expert, had taken no steps until the eleventh hour and, when ordered to provide grossing-up calculations after an adjournment was refused, had produced only a UK-law calculation, none under US law or under UK law with foreign service relief. It had only itself to blame. A party contending that another country's tax law governs the grossing up must give the tribunal the information needed to apply it; without it the tribunal could not be faulted for grossing up under UK law. [Summary not yet checked against the judgment.]