BIM41805 - Specific receipts: voluntary receipts: loss of office
Voluntary payments in recognition of past services or as consolation for the loss of a business connection were held not to be receipts of the trade in Chibbett v Joseph Robinson & Sons  9TC48; Walker v Carnaby Harrower, Barnham & Pykett  46TC561; Simpson v John Reynolds & Co (Insurances) Ltd  49TC693; and Murray v Goodhews  52TC86.
But the mere fact that a voluntary payment is made following the cessation of the business connection is not sufficient to render the payment non-taxable. In other cases receipts have been held to be taxable as trading receipts (McGowan v Brown and Cousins  52TC8; Rolfe v Nagel  55TC585; and Blackburn v Close Brothers Ltd  39TC164).
In the light of the above case law our view is that voluntary ’compensation’ payments may be regarded as properly excluded from the computation of trading profits where all the following conditions are satisfied:
- it is clear that the recipient had no legal right whatsoever to the compensation or to anything that it is intended to replace;
- the payment cannot on any view be regarded as additional payment for past services, though it may be made by way of recognition of past services and consolation for the termination of a personal business connection;
- it is made after the business relationship has ceased and there is no likelihood of its being renewed.
- it was unexpected in the sense that it was not sought and that, when the business relationship was entered into, there was nothing to suggest that it would be discontinued after a period and that compensation would be paid on termination.