Share this content

Introduction / sales commission paid 2 years after employment


In 2009 Consultant A, a UK resident and tax payer, working on a freelance basis under an "umbrella company" which paid PAYE out of contract income, signs a contract to introduce Company B to Company C.  If the result of said introduction produces any revenue for Company B then Consultant A is paid 2.5% commission from the year 1 revenues arising and 1.25% in year 2.  Company B is based in Bulgaria and will pay the commission in Euros (being the currency of contract with Company C).  

In 2011 Company C finally enters into a commercial relationship with Company B thus triggering Consultant A's entitlement to payments out of 20,000 Euros per month of revenue.  These are to be paid as Company B receives revenue from Company C.  Consultant A elects to take this payment quarterly to minimise bank charges on payments on relatively small amounts.

Since 2010 Consultant A resigned their freelancing work under the Umbrella Company and became a full time employee of a different unrelated business.  Special terms were negotiated with the new employer to allow continuation of the terms of the contract with Company B - normal employment terms forbid any commercial relationships with other companies.  Ex Consultant A is a higher rate tax payer, any additional income is likely to push total taxable earnings above £100,000 per annum.


Ex Consultant A is now ready to receive commission payments and must raise invoices to trigger payments which will be quarterly until end of 2013.  The question is how should ex consultant A treat the income for Self Assessment purposes and also for National Insurance?

Given the tax situation it might seem efficient to put the income into a pension policy, however as ex Consultant A has credit card debts of £47,000 their preference is to repay the debts as much as possible.

Many thanks for any advice!


Please login or register to join the discussion.

By empee
03rd Jan 2012 17:59

sorry for mistakes in nomenclature

I have corrected the posting above, the use of A, B and C was inconsistent, hence confusing (could be why nobody replied?)

Thanks (0)