Cash gift from employer?

olivetti

If the directors are leaving the company and taking no part in the new company then I guess it 'might' be possible for the payment to be considered a gift at the end of a business relationship, expect even that to be questioned though.

If they are working for the new enlarged company or even have more than 5% of the shares in new company I cannot see this being anything other than employment income.

longforgotten

Ok I am seeing this as fiddling the books by the directors and the accountant but will Coolhand Luke be out of pocket ?

Say he received £10,000 as a 'gift', the tax man man then says no it should have been dealt with under PAYE. I had thought the tax man would consider the £10,000 be net of deductions, would gross up the £10,000 and make the company pay the tax,ni ee's and ni er's + penalty. Coolhandluke would still have the £10,000. But would there be any comeback on Coolhandluke for 'conspiring' in all this....not showing it on a self assessment form if he fills one in....

Just wondering ..........

CoolHandLuke45

The accountant said the director can pay my bonus personally as a gift legally. This would be a gift for inheritance tax (IHT) purposes, but the director could make use of the £3k annual IHT gift exemption for this year and £3k for last year and so provided he makes no other gifts and lives longer than 7 years from the date of the gift, this should not impact his IHT position and I can receive the whole payment with no tax or NI.

RayWolfe

The accountant is not being paid by you. You have no contract with the accountant. He does not have you interest in mind. Hire your own man if you want an opinion that will consider your interests.
From what you have told us, this is a fiddle perpetrated on the new owners, the tax man (us) and possibly yourself!

Incidentally IHT, in these circumstances, is a total red herring, and certainly not your problem. Sounds like a fob off if you ask about your PAYE and get told about his IHT.

TM1976

I understand the deal and the motives behind it but I still think it is taxable income. How can it be a gift when it is contingent on you waiving your bonus?

Crispinator

CoolHandLuke45 wrote: »

The company is being acquired and the acquiring company will pay a mixture of cash and shares to the 2 directors. The cash payment will be worked out as profit over the last 12 months x10. The problem for the director is that my bonus will be taken out of the profit figures and will end up costing the directors a large sum personally (my bonus x10). So by paying me the money personally the director will save a large chunk of money.

That's not really a problem of the director, is it?

Let's face it, through your labour you helped contribute to the profit in the first place, so he should just suck it up and pay you as normal. Bit tricky situation for you of course as its a small company.

IMO this is blatant tax evasion and I'd love to know who the "accountant" is. Do you know if they're chartered or certified? As anyone can call themselves just an "accountant".

John_Pierpoint

From the tax position let us guess that 10K (say) will now pay 18% CGT instead of 20% + 11% Income tax & National Insurance.
How is you annual "bonus" normally arrived at?
Is it a contractual right? Believe it or not, my mother used to work for a Persian, who would dish out Xmas bonuses like this, if the company had had a good year (It is a cultural thing - a British boss might think he had been fair if he gave you a Turkey) but I don't think there was any contractual right to the money and the employees, more of a family really, were expected to "marry" the job.

So now the proposal is not to give any annual bonus BUT the director will give a personal gift? The purchasing company has a right to feel aggrieved if it really is being ripped off and obviously if it is intending to retain the existing staff there would be instant loss of trust.

I think we need to know more about what exactly is happening before we all rush to defend the tax system and accuse people, who minimise taxes, of being crooks.

CoolHandLuke45

Thank you for your input. I have decided to reject the offer as there is far too much to suggest it is unethical/illegal despite the fact the accountant told me that the director will be paying full tax on it and it also counts against his inheritance allowance

Can this thread please be closed.

Mikeyorks

John_Pierpoint wrote: »

I think we need to know more about what exactly is happening before we all rush to defend the tax system and accuse people, who minimise taxes, of being crooks.

With respect - I think the OP clarified the situation beyond reasonable doubt in post #9?