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Bonus to individual from client

Client, Mr X trades through his company X Ltd.

A client of his has recently given him a cheque made payable to Mr X personally for £100 and a personal letter thanking Mr X for the efforts he has put in helping client over last few years.  Mr X helped out client significantly at no charge a couple of years ago before client became a client of X Limited.

My gut feeling is that Mr X should declare the money on his personal tax return as untaxed income but that it does not need to go through X Limited and also have VAT paid over but I am unsure about this.

Can anyone give me their opinion please?

Thank you.

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Tip

It's the same as a taxi driver, hairdresser or any other employee receiving a tip.  Not subject to VAT for X limited but personally taxable on Mr X.

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Not a Taxable receipt?

Based on the info supplied, it might be argued that the receipt is non taxable. The payment made appears to have been wholly unexpected and unsolicited and therefore tax free. There appear to be a number of tax cases that support this view.

Had company X been charged by the client for the services then I would agree that the receipt would be taxable similar to a tip.

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Just give the man his cheque ....

and forget about it!  Is it even worth writing about? 

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Thanks

Justphil - Yes it was wholly unexpected and unsolicited, in fact Mr X is quite embarrassed to have received it as he just wanted to help out the now client who was in an difficult position at the time. He plans to give it to a charity poignant to the client.

Hansa, it may be a small amount but I would still like to account for it correctly.

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unsolicited gift

From the information given, the cheque was made out to Mr X personally (as was the covering letter), It therefore clearly has nothing to do with your client company which simply acted as a postbox.

It was (apparently) an unsolicited gift and thus (per justphil above) almost certainly tax free. 

As Mr X is planning to donate it to charity, problem solved. 

 

 

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