The meaning of the words “obligation incurred before” was considered in a 2000 case relating to the termination payment for an employee.
A bank manager retired on 31 July 1995 and received a lump sum of £42,919 from his employer. He was taxed on the excess above £30,000. He appealed on the ground that tax law still allows a more generous allowance for an obligation incurred before 10 March 1981. He argued that the obligation arose from his contract of employment which started before this date.
This argument was dismissed. The contract of employment may have started before 10 March 1981 but the obligation of the payment was not established until the employee gave his notice and the amount could be calculated.
SpC245 O’Brien v Williams [2000]