The principle established by the case of British Transport Commission v Gourley1 is that where damages are awarded for loss of income and:
- Ìý
(a)ÌýÌýÌýÌý the income would have been subject to tax if it had been received in the normal course, and
- Ìý
(b)ÌýÌýÌýÌý the amount received as damages will not be liable to tax,
then the amount of the damages must be reduced to take account of the tax which would have been payable under (a). That is, the person must not be placed in a better or worse position than if the contract had been carried out.
Example
CD claims damages from his employer because he was not given proper notice of his termination.
Under the Gourley principle the damages are first calculated by reference to the pay that CD would have received during the notice period if proper notice
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Web page updated on 17 Mar 2025 14:15