gift of asset

gift of asset

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Client is a well known self employed guitarist, not trading through a limited company (for reasons I won't go into here).

Out of the blue he receives a gift of a new guitar from a well known manufacturer.

Reason? Probably the usual one. Because the manufacturer wants client to be seen by the public playing their instrument.

Other than this he has no connection with the manufacturer. Client doesn't carry out any paid work for them at all or receive any fees from them.

The question is ... will client be obliged to include the value of this gifted instrument in his accounts as taxable income from his profession?

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By Steve Kesby
12th Jan 2012 16:02

yes/no

The guitar is certainly a receipt of the trade, but I can't see any necessity to impose a market valuation.  It should be dealt with according to GAAP.  If he had earned it, you'd include it a value to represent the value of the work done, and market value might be appropriate.  As a gift though, I can't see that there's any need to bring in a value.

It's eligible for CAs under S.14 CAA 2001 (although it's not then eligible for AIA), but, having been received as a gift to the trade, I think you would have to bring in a value as income if you wanted to claim the allowances.

If HMRC argue that you should bring the value in as a receipt, you're free to claim P&M allowances, but there's a timing difference because you can't claim AIA.

HMRC might try and argue that S.172B ITTOIA 2005 applies, but I don't believe that would be correct, as the guitar is not trading stock.

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By taxinfo
12th Jan 2012 16:21

Thank you Steve. Interesting thoughts for me to bear in mind.

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