tax on sales incentive goods - help needed

breedso

Please can somebody help clarify something for my girlfriend. She has a full time job and also works self employed in direct selling- selling cookware in peoples houses - she earns comission on sales but the company she represents offers sales incentives to her - often pieces of cookware etc.

My girlfriend is completing her tax return and somebody has suggested she should declare the incentives as taxable income (by including the value of the goods she receives). Neither of us are accountants but the HMRC tax guidelines BIM45090 would indicate this is correct.

Surely this is a dis-incentive if she has to pay tax on the value of the goods she receives as an incentive???

It should be all about increasing household income not paying more tax. I am not sure if avon and betterware sellers etc receive incentives and would be in a similar situation??

Thanks in anticipation.

pjclar02

Hello there

Yes - I'm afraid the incentives are taxable.

I understand what you are saying about them being a disincentive, however, I would rather have a piece of cookware worth £100 and pay tax on it than have nothing. Ultimately, I guess she could sell the cookware and make a profit after having paid the tax

jimmo

I think the key to this is actually in BIM 45090.
As a newbie you are not allowed to post links but I am.
http://www.hmrc.gov.uk/manuals/bimmanual/BIM45090.htm
The measure of your girlfriend’s income is the market value of any incentive she receives. That is not the retail price. It is how much she could expect to receive if she sold the item. In other words it is the second hand value.
I am not an avid fan of Ebay but even I see lots of adverts on there for unwanted prizes at a fraction of the retail price.
I would suggest that as a very rough guide if your girlfriend chooses to keep an item she has received as an incentive, the second hand value will be a small percentage of the retail price, maybe 25%.
However, if she chooses to sell the item the market value will be what she sells it for.
As it happens, my wife received an incentive prize last week. It was a salad spinner which is no use to us and not worth the bother to try and sell so it went straight into the bin. She won’t be paying tax on that.