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rule in Re Pettit


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The tax rule that applies when an agreement states that the payer is to pay Q £100 “free of tax”. The payer is then required to make a payment to Q of £100; this is equivalent to £128.20 gross and the recipient's income is therefore taken to include not £100 but £128.20 (Re Pettit, Le Fevre v Pettit [1922] 2 Ch 765). Illogically, the rule does not apply to court orders (Jefferson v Jefferson [1956] 1 All ER 31).

Subjects: Law.


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