In the last edition of our discrimination law review we reported that the First Tier Tribunal (Tax) had ruled that a compensation payment made to an employee on the termination of their employment for injured feelings was taxable. However, the EAT has since refused to follow that decision, ruling that compensation for injured feelings arising from a discriminatory dismissal is not taxable. An appeal against the decision of the Tax Tribunal is pending. Until that appeal is determined, HMRC is likely to insist that compensation for injured feelings arising from a discriminatory dismissal is taxable, whereas Employment Tribunals will have to follow the EAT’s approach when assessing compensation, potentially leaving claimants out of pocket. We will keep you informed of developments.