Gift to employee

Gift to employee

Didn't find your answer?

my company was given a Ipad by a supplier.

the company intend to raffle it off in a draw so that an employee wins it.

We have a few contractors within our workforce and there is a disagreement between a few directors with some saying that they should be allowed to enter and some saying no.

I've looked on HMRC website regarding gifts but can not find anything relating to this.

I was wondering if anyone has dealt with this before and can point in the right direction to a web page showing this.

CIA

Replies (18)

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By duncanedwards
21st Aug 2014 10:19

A contractor ...

presumably isn't an employee - otherwise they'd be an employee.  That being the case, any tax provisions relating to employees, aren't relevant, I would suggest.

That said, I'm not sure what your point is.  When you say raffle, do you mean people buying tickets or is it just a drawing of a name from a theoretical hat?

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By Pelican
21st Aug 2014 10:53

Thanks for your reply.

The name will be drawn out of a hat. No money involved.

I'm under the impression that contractors shouldn't be allowed in it.

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Euan's picture
By Euan MacLennan
21st Aug 2014 12:38

What is the problem?

The iPad did not cost the company anything, so there is nothing to be disallowed as a deduction from the company's profits.

For the recipient, winnings from a lottery are not taxable, whether they are an employee or an outside sub-contractor.

Even if it were taxable, who is going to know?  There is no invoice, no income and so, no audit trail.

Life's too short.  Just decide on staff relations grounds whether to include sub-contractors or not and get on with it.

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Replying to GHarr497688:
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By duncanedwards
22nd Aug 2014 15:03

Problem is the risk of getting it wrong!

Euan MacLennan wrote:
For the recipient, winnings from a lottery are not taxable, whether they are an employee or an outside sub-contractor.

I'm sure that's not a correct generalisation.  If the "lottery" is one for employees, then, by definition, any winnings have (at the very least) a connection with the employment and so would have the appearance of remuneration.

EDIT: See HMRC manual for example of their view: http://www.hmrc.gov.uk/manuals/eimanual/eim16220.htm

In this case, it's somewhat less clear as the iPad wasn't deliberately acquired by the client.  At the end of the day, however, an employee may end up with an iPad because of his/her employment.

 

Euan MacLennan wrote:
Even if it were taxable, who is going to know?  There is no invoice, no income and so, no audit trail.

 

I'm not sure if you are a professional adviser but this is, to say the least, an interesting approach to tax compliance!

I've known HMRC find out about things (eg staff events) in the most roundabout way (eg photo/article in local newspaper) and challenge the treatment - unsuccessfully because the matter was correctly dealt with.

 

 

 

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Replying to Chris.Mann:
Euan's picture
By Euan MacLennan
22nd Aug 2014 17:15

Wrong HMRC guidance

duncanedwards wrote:

Euan MacLennan wrote:
For the recipient, winnings from a lottery are not taxable, whether they are an employee or an outside sub-contractor.

I'm sure that's not a correct generalisation.  If the "lottery" is one for employees, then, by definition, any winnings have (at the very least) a connection with the employment and so would have the appearance of remuneration.

EDIT: See HMRC manual for example of their view: http://www.hmrc.gov.uk/manuals/eimanual/eim16220.htm

In this case, it's somewhat less clear as the iPad wasn't deliberately acquired by the client.  At the end of the day, however, an employee may end up with an iPad because of his/her employment.

EIM16220 is about Vouchers and Credit-tokens.  iPads have been called many things, but not vouchers.  The relevant guidance on Incentive Schemes, which is what you are suggesting a lottery for employees must be, is EIM11205.  Note the penultimate section:

vouchers not usedfor directors and employees within the benefits code (see EIM20100 to EIM20102) the charge is the full cost to the provider of making the award

Even if awarded directly to an employee as an incentive, rather than as a prize in a lottery open only to employees, the cost to the company which provided the iPad is nil, so the benefit is nil.  You cannot say that the provider of the award was the supplier - he gave it to the company and it was the company's decision to give away it as a prize.

 

duncanedwards wrote:

I'm not sure if you are a professional adviser ...

Don't be impertinent.

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Replying to bigugly:
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By duncanedwards
22nd Aug 2014 18:33

Fact

Euan MacLennan wrote:

duncanedwards wrote:

I'm not sure if you are a professional adviser ...

Don't be impertinent.

 

It's called a statement of fact.  I don't know you what you do for a living.

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Replying to Michael C Feltham:
Stepurhan
By stepurhan
23rd Aug 2014 10:35

Not the way you said it

duncanedwards wrote:
It's called a statement of fact.  I don't know you what you do for a living.
Read in isolation, its a statement of fact. Read the way you posted it, its an insult.

By all means question someone's response, but don't throw cheap insults in. Definitely don't throw cheap insults in and then try to claim they aren't. It just shows a basic lack of respect. You may well be making valid points, but being a git about it makes me less inclined to read the walls of text you are putting up.

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Replying to Chris.Mann:
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By duncanedwards
22nd Aug 2014 19:16

How about this?

duncanedwards wrote:

I'm sure that's not a correct generalisation.  If the "lottery" is one for employees, then, by definition, any winnings have (at the very least) a connection with the employment and so would have the appearance of remuneration.

EDIT: See HMRC manual for example of their view: http://www.hmrc.gov.uk/manuals/eimanual/eim16220.htm

In this case, it's somewhat less clear as the iPad wasn't deliberately acquired by the client.  At the end of the day, however, an employee may end up with an iPad because of his/her employment.

 

Right, try again.

(1) If an employer bought an iPad and gave it to an employee, I assume we all agree that's a benefit "made or provided 'by reason of the employment'".

(2) If an employer with 2 employees bought an iPad, tossed a coin and gave it to the employee who called heads, that too must be a benefit.

(3) If an employer with 500 employees bought an iPad and gave each employee a lottery ticket with one lucky ticket holder getting the iPad, is that not a benefit too?

(4)  I can't think of any way to categorise the proposals described by the OP other than as an "incentive scheme".

HMRC Guidance on incentive awards is here (at Page 21):

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

"Non-cash awards and vouchers which cannot be exchanged for cash

For PAYE purposes

If you provide the award, you can either

:• fill in the gross value of the award on form P9D or P11D,

or• account for the tax by:

-entering into a Taxed Award Scheme (see paragraph 38) to account for tax on the value of the award grossed at the basic or higher rate of tax, or--

-entering into a PAYE Settlement Agreement (seepage 70) to pay in a lump sum the tax on the value of the award grossed up by reference to the employee’s rate of tax.

If a third party provides the award they can only account for the tax by entering into a Taxed Award Scheme."

 

In the OP's case, things are complicated.  The OP said "my company was given a Ipad by a supplier".  It appears therefore that it's not a question of the supplier giving something to the employee, but the company (employer).

Now HMRC's view on who provides a benefit (assuming, for argument's sake that there is one) is:

"That person need not necessarily be the one who physically "hands over" the benefit to the director or employee so long as they are, ultimately, the source of the funds used to pay for the benefit, see Wicks v Firth (56TC 318)."

That could point to the supplier being the provider but I think there is an argument that the iPad belongs to the company (absent anything relevant not disclosed to about the "gift") which could have chosen to sell the iPad and keep the proceeds.  If the company then decides to give a company asset to an employee chosen by lottery, it as, to that extent, funded it.

 

The OP asked for views and mine is that it looks like a taxable benefit for the recipient.  Do HMRC operate a de minimis limit which might apply if my analysis is correct?  No idea but the cheapest iPad appears to cost £400 so I don't think it would fall to be treated as a trivial benefit.

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Replying to tanyajackson:
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By cparker87
22nd Aug 2014 19:21

Nil cost

duncanedwards wrote:

duncanedwards wrote:

I'm sure that's not a correct generalisation.  If the "lottery" is one for employees, then, by definition, any winnings have (at the very least) a connection with the employment and so would have the appearance of remuneration.

EDIT: See HMRC manual for example of their view: http://www.hmrc.gov.uk/manuals/eimanual/eim16220.htm

In this case, it's somewhat less clear as the iPad wasn't deliberately acquired by the client.  At the end of the day, however, an employee may end up with an iPad because of his/her employment.

 

Right, try again.

(1) If an employer bought an iPad and gave it to an employee, I assume we all agree that's a benefit "made or provided 'by reason of the employment'".

(2) If an employer with 2 employees bought an iPad, tossed a coin and gave it to the employee who called heads, that too must be a benefit.

(3) If an employer with 500 employees bought an iPad and gave each employee a lottery ticket with one lucky ticket holder getting the iPad, is that not a benefit too?

(4)  I can't think of any way to categorise the proposals described by the OP other than as an "incentive scheme".

HMRC Guidance on incentive awards is here (at Page 21):

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

"Non-cash awards and vouchers which cannot be exchanged for cash

For PAYE purposes

If you provide the award, you can either

:• fill in the gross value of the award on form P9D or P11D,

or• account for the tax by:

-entering into a Taxed Award Scheme (see paragraph 38) to account for tax on the value of the award grossed at the basic or higher rate of tax, or--

-entering into a PAYE Settlement Agreement (seepage 70) to pay in a lump sum the tax on the value of the award grossed up by reference to the employee’s rate of tax.

If a third party provides the award they can only account for the tax by entering into a Taxed Award Scheme."

 

In the OP's case, things are complicated.  The OP said "my company was given a Ipad by a supplier".  It appears therefore that it's not a question of the supplier giving something to the employee, but the company (employer).

Now HMRC's view on who provides a benefit (assuming, for argument's sake that there is one) is:

"That person need not necessarily be the one who physically "hands over" the benefit to the director or employee so long as they are, ultimately, the source of the funds used to pay for the benefit, see Wicks v Firth (56TC 318)."

That could point to the supplier being the provider but I think there is an argument that the iPad belongs to the company (absent anything relevant not disclosed to about the "gift") which could have chosen to sell the iPad and keep the proceeds.  If the company then decides to give a company asset to an employee chosen by lottery, it as, to that extent, funded it.

 

The OP asked for views and mine is that it looks like a taxable benefit for the recipient.  Do HMRC operate a de minimis limit which might apply if my analysis is correct?  No idea but the cheapest iPad appears to cost £400 so I don't think it would fall to be treated as a trivial benefit.

It's Friday and I don't have my books to refer to. However, if an employer provides a benefit to the employee are they not taxed upon the cost to the employer? (Think there is a case with arilines?) so that'd be Nil.

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Replying to GHarr497688:
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By cparker87
22nd Aug 2014 18:54

Shocked and appalled...!

Euan MacLennan wrote:

The iPad did not cost the company anything, so there is nothing to be disallowed as a deduction from the company's profits.

For the recipient, winnings from a lottery are not taxable, whether they are an employee or an outside sub-contractor.

Even if it were taxable, who is going to know?  There is no invoice, no income and so, no audit trail.

Life's too short.  Just decide on staff relations grounds whether to include sub-contractors or not and get on with it.

But I wholeheartedly agree. Stop procrastinating and get it raffled off. Next question!

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By WhichTyler
21st Aug 2014 13:18

You could...

.sell raffle tickets to anyone who wants (as an incidental, non-commercial lottery) and give the proceeds to charity. When I've done this it went down really well, as people don't feel bad/resentful to the winner, everyone feels good, and in fact a number of other departments that had received gifts from suppliers/contacts (this was around Christmas) added theirs to the pool, helping raise even more. (But don't bank the proceeds in the company bank account, just send them straight to the charity)

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Stepurhan
By stepurhan
22nd Aug 2014 17:29

Possible vouchers

I think duncanedwards was asserting that lottery TICKETS would be considered vouchers, as referenced in the link provided. Since the intention up to Euan's original post was simply drawing names from a hat, there were no tickets to be taken into consideration.

A flippant comment about a pragmatic solution is hardly a reason to question someone's professionalism though. Sometimes, whilst not strictly correct, some things are not worth anybody's time.

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By Steve Kesby
22nd Aug 2014 19:37

And s. 62?

Under s. 62 employee's can be taxed on the money's worth of the iPad. ie it's secondhand value.

Non-employees would be taxable on the same amount, but it's not reportable on the P11D.

On the topic of who's going to know, if I were the employer, I'd know. Sufficient in my mind to for me to want to do the right thing.

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Replying to Vile Nortin Naipaan:
Euan's picture
By Euan MacLennan
24th Aug 2014 12:25

And - what do you think is the right thing?

Steve Kesby wrote:

And s. 62?

Under s. 62 employee's can be taxed on the money's worth of the iPad. ie it's secondhand value.

Non-employees would be taxable on the same amount, but it's not reportable on the P11D.

On the topic of who's going to know, if I were the employer, I'd know. Sufficient in my mind to for me to want to do the right thing.

You are presumably alluding to s.62(2)(b) ITEPA 2003:

(2) In those Parts “earnings”, in relation to an employment, means—

   (b)  any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth,

It is not a gratuity or other profit, so you must think that a prize in a lottery organised by the employer is an incidental benefit obtained by the employee.  Do you think that including third party sub-contractors in the lottery would avoid it being an incidental benefit if an employee wins?  You say "can be taxed on the money's worth" - in what circumstances would it be taxable on its market value, rather than on its cost to the employer?

You have thrown in your little teaser - please now tell us your conclusion.

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Replying to carnmores:
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By duncanedwards
24th Aug 2014 14:17

Employment

Euan MacLennan wrote:
Do you think that including third party sub-contractors in the lottery would avoid it being an incidental benefit if an employee wins?

If an employee wins, they won because they were in the lottery by virtue of being an employee. There is a link between the employment and receiving a benefit in kind.

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By User deleted
23rd Aug 2014 10:43

To the OP

my company was given a Ipad by a supplier.

Has this been recorded in the books of the company??

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By Steve Kesby
24th Aug 2014 15:33

There's no "prize" Euan...

... and there's no "lottery". Not really. Let's not be hoodwinked by somebody else's chosen terminology.

There's already an iPad that has been given to the "employer" and that the "employer" already intends to give to an "employee".

The "employer" just has to come up with a way to choose which "employee" to give it to, and who constitutes an "employee" for the purpose.

Once those matters are resolved, the chosen "employee" will be given the iPad by reason of their "employment". Those are the facts.

I did indeed say can. And I deliberately chose the word can over alternatives like may and might. I used the word can to mean that it is one of a number (two in this case) of alternatives.

In the case of an actual employee, the gift of the iPad can be taxed in one of two ways:

under s. 62, as an incidental benefit, as you surmise, which will be based on its money's worth, orunder Chapter 10 of Part 3, which will be based on the cost to the employer.

Your question then is, essentially, which of the two. The answer though could be both.

The answer is provided by s. 64. Let's call the s. 62 benefit A and the Chapter 10 benefit B. If A exceeds B, it's all taxable under s. 62. If B exceeds A, A is taxable under s. 62 and (B - A) is taxable under Chapter 10.

Can was just a more convenient short form response. :) It was made in response to Chris Parker's point.

If the "employee" is a subcontractor, then the position is as referred to in BIM40051.

There isn't any accounting for the "employer", incidentally, the cost of the iPad is recognised in the P&L as an employee or subcontractor cost. The amount so recognised is nil. Or should I say £nil Euan? :)

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By Portia Nina Levin
02nd May 2015 12:52

(No subject)

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