RAE/PS

4th January 1966

Dear Mr. Beck,

With reference to our conversation yesterday morning I looked up the Income Tax Acts to make certain of the tax position in connection with any lump sum payment you may receive from Marconi Instruments Limited by way of compensation for loss of office or otherwise. I find I was wrong in saying it would not be taxable.

Before 1960 such payment was treated as a capital payment and so escaped the net of the Income Tax Acts. This situation was altered by the Finance Act 1960 (sections 37 and 38) whereby any payment made "whether in pursuance of any legal obligation or not in consideration of or in consequence of or otherwise in connection with the termination of the holding of the office or employment" is liable to be taxed under Schedule E as earned income. An important exception is that the first £5000 of such payment is exempt and so tax will only be chargeable on the excess over £5000.

Another relief which might possibly apply to you is provided for in the 4th Schedule of the 1960 Act. The effect of this is to reduce the tax to what it would have been if the receipt had not been paid, in the case of compensation for loss of office in any one year but spread over the unexpired period of service, or in the case of a receipt other than for loss of office over a period of six years. The relevant provisions make rather complicated reading and I will study them further if I hear from you that your claim is likely to succeed.

Yours sincerely

R.A. Eames

H.V. Beck, Esq

6 Manland Way

Harpenden

Herts