Cash Gift

lamby1_2

Hi there

I have a query that I could do with some advice on. I am self-employed and had been providing services for a client which was fully charged out through my business, client charged VAT etc. so no problems there.

However I have also developed a friendship with the same client and having now disposed of a property which I was managing he has come into alot of money.

He wants to pay me a cash gift as he is in a position to do so which he insists is for me and my family to enjoy a hol or other and he insists it is not payment for my services merely that he wishes to show his appreciation.

I know there is no VAT implication as I have not provided any services in exchange for the cash but what about tax and NIC? Please help....

fengirl_2

The Inspector of Taxes in me would ask 'would this guy be giving you this money if you had never worked for him?' Isnt 'showing his appreciation' another way of saying thank you for the work you did? If so, then it should form part of your business receipts and be subject to tax and NIC.
These are just my thoughts - maybe Jimmo will be along in a minute.

lamby1_2

Thanks for the advice.

I suspected that would be the case but like most of us had hoped there was a shred of a chance that I wouldn't be liable for tax & NIC.

Will make sure I include it in 2007-2008 tax return.

lamby1_2

The site has been sold on to a new buyer (Client for which we have been appointed to continue management in a scaled down capacity and is an entirely separate arrangement from the original client (Client A) who are wanting to make the cash payment to us. Client B has kept us on by their own choice and had no legal obligation to do so.
In respect of Client A, making the cash payment, I am now just processing the tie up areas of the site post-completion and had'nt planned on invoicing for any further work as the tie up falls within the fees already charged pre-completion.
Client A wants me to continue a small book-keeping role just to manage his bank account but again this is a new, separate arrangement from the site that has been sold. There is no way that the business relationship concerning the site can be renewed with Client A as they have sold it.
The payment is a voluntary payment at the end of a service arrangement for the sold site. We have no legal right to the £ or to what amount is paid and have submitted no invoice as it is not connected to any services.
When we took the client on we were not aware that this payment would be offered.
Please can you tell me if you think we satisfy the 4 points & does tax NIC apply?

lamby1_2

Thanks for all your help...

It really is just an offer of an innocent, kind gestured gift of £3000 and I really had hoped that with all the tax we already pay that it would be exempt.

I totally understand what you say and I really don't want to be looking over my shoulder wondering if the taxman is going to start looking at me as a dishonest person which couldn't be further from the truth.

Its a dilema whether to declare if there is justification that its not taxable but who wants to take on HMRC. I am defeated.....looks like HMRC will get their slice of pie even when they're not entitled to it!

chappers

As Jimmo says its a matter of weighing up the costs of proving this is a gift against the cost of the tax/NI.

Now don't take this as advice but how likely is it that HMRC is ever going to find out about it if the old fella gives you the cash.
As a builder I have obviously in the past done several bits and pieces of work for cash, some of them even going through my personal account, now whilst I realise this is technically illeagal, the chances of being caught are so minimal , in fact so much so that two investigations one when I was a sole trader and a second against my limited company , failed to pick any of these up.
Obviously its down to your own personal view on tax evaision or your own fear of being caught out.
Personally do your self a favour get the old man to take the cash out the bank and you spend it on whatever you like, if you explain to him that the tax man will get his hands on some of it otherwise, I'm sure he will understand.

barak

chappers wrote: »

As a builder I have obviously in the past done several bits and pieces of work for cash, some of them even going through my personal account, now whilst I realise this is technically illegal, the chances of being caught are so minimal, in fact so much so that two investigations one when I was a sole trader and a second against my limited company, failed to pick any of these up.

If only contributors to these boards were anonymous..........

chappers

barak wrote: »

If only contributors to these boards were anonymous..........

I'll await the knock at the door then....