Gift of money

Gift of money

Didn't find your answer?

If a friend gives £10,000 to a friend what are the tax implications on both parties? This is not a loan it's a gift.  Does this change if the person giving the money is the employer of the person receiving the cash?     

Replies (76)

Please login or register to join the discussion.

By mrme89
27th Jun 2014 11:22

What is the reason for the 'gift'?

Thanks (0)
Replying to Moonbeam:
avatar
By The Idiot
27th Jun 2014 12:10

To just help a friend I believe 

Thanks (0)
By slipknot08
27th Jun 2014 13:07

potentially exempt

A makes a gift to individual B of £10,000.

The initial thing to consider is IHT. If A did not make any other gifts this year or last year, then £6,000 (£3k pa) of the gift is immediately exempt. The balance is a potentially exempt transfer, which may fall into charge in A's estate (depending on the size of the estate, other lifetime & exempt gifts, available nil rate band, etc) if A dies within seven years.

Depending what B does with the money (ie clearing debts, buying a car, or maybe investing it), he or she will be taxable on any income arising from it (unless invested in an ISA, for instance).

Providing it is a true gift and no consideration in the form of services is required by A from B, then no employment relationship will have been created.

That's about it, really...

 

Edit: sorry - misread the OP. yes, the position does potentially change if A is already the employer of B -

It will be difficult to rebut the presumption that any such gift derives from the employment and is thus taxable under s.62 ITEPA, however, EIM01460 lists the types of gifts that may not be taxable as earnings, including -

"A gift does not count as earnings within Section 62 if it is made:

on personal grounds (for example, a wedding present) oras a mark of personal esteem or appreciation."

Thanks (1)
avatar
By Kirkers
27th Jun 2014 12:45

I'm not sure on the truth to this, but personally I would be concerned of any backlash with an employer giving an employee 10k as to whether HMRC would say it should have been processed through the payroll and is disguised wages.

Are they considered connected persons?

Thanks (0)
Replying to GW:
By mrme89
27th Jun 2014 15:30

.

Kirkers wrote:

I'm not sure on the truth to this, but personally I would be concerned of any backlash with an employer giving an employee 10k as to whether HMRC would say it should have been processed through the payroll and is disguised wages.

Are they considered connected persons?

 

This was my initial thoughts.

 

It's not exactly common for friends to give oneanother £10k for no apparent reason.

Thanks (0)
avatar
By The Idiot
27th Jun 2014 15:27

no just friends
 

no just friends

 

Thanks (0)
avatar
By The Idiot
27th Jun 2014 15:30

They go back a long way and B has done some work on a subcontract basis to a company of which A is a shareholder

Thanks (0)
Replying to Accountant A:
By mrme89
27th Jun 2014 15:33

Gift??

The Idiot wrote:

They go back a long way and B has done some work on a subcontract basis to a company of which A is a shareholder

 

In that case, it doesn't sound like a gift. Its sounds like payment in return for work carried out and would be taxable income.

Thanks (0)
Replying to Accountant A:
avatar
By Kirkers
27th Jun 2014 15:34

I see

The Idiot wrote:

They go back a long way and B has done some work on a subcontract basis to a company of which A is a shareholder

So B is a subcontractor and not an employee?

I also thought the £6,000 exempt amount was between family.. but I'm just looking for the guidance on that!

Thanks (0)
Replying to johngroganjga:
By slipknot08
30th Jun 2014 15:35

No, the AE is for gifts to anyone... BUT

Hi Kirkers :-)

S.19 IHTA

(1) Transfers of value made by a transferor in any one year are exempt to the extent that the values transferred by them (calculated as values on which no tax is chargeable) do not exceed £3,000.

(2) Where those values fall short of £3,000, the amount by which they fall short shall, in relation to the next following year, be added to the £3,000 mentioned in subsection (1) above.

 

However, because the inital gift is a PET, the AE doesn't get used unless the PET later proves to be chargeable, in which case (s.19(3A)) "...[it] shall for the purposes of those subsections be taken into account as if, in the year in which it was made, it was made later than any transfer of value which was not a potentially exempt transfer."

Thanks (1)
Replying to SUEBEN2003:
Red Leader
By Red Leader
30th Jun 2014 16:49

@The Idiot

When you get to Australia, stop digging.

Thanks (4)
avatar
By The Idiot
27th Jun 2014 15:37

Yes B is a subcontractor and has been paid at the going rate (not mate's rates) for the work he's done 

Thanks (0)
Replying to Cloudcounter:
By mrme89
27th Jun 2014 15:43

.

The Idiot wrote:

Yes B is a subcontractor and has been paid at the going rate (not mate's rates) for the work he's done 

 

You don't seem to be very forthcoming with information.

 

What exactly is the payment for?

What makes you think the payment is a gift?

Thanks (0)
Replying to Ken Howard:
avatar
By The Idiot
27th Jun 2014 16:05

Sorry I'm just answering the questions as they arise. I'm told it's a gift to help a friend. 

Thanks (0)
Replying to Jennifer Adams:
avatar
By Kirkers
27th Jun 2014 16:27

IMO

The Idiot wrote:

Sorry I'm just answering the questions as they arise. I'm told it's a gift to help a friend. 

In the nicest way (and I mean no offence) but if that is all the information you've been given from the client I wouldn't be willing to advise them on any tax implications at all if I were you. The last thing you want is to know half the story and have the client say 'my accountant said it was fine' if HMRC were to look into it.
Thanks (2)
avatar
By Kirkers
27th Jun 2014 15:46

What is the payment actually for? I don't think HMRC would accept 'to help a friend out' as a valid reason for giving 10k away.

Does the doner have considerable assets? Could this come back on him if he dies within 7 years as part of his estate for IHT?

Thanks (0)
Portia profile image
By Portia Nina Levin
25th Apr 2015 13:05

(No subject)

Thanks (0)
By mrme89
27th Jun 2014 16:08

What about the questions Kirkers and I have asked?

 

You are going to struggle to get an difinitive answer at this rate.

Thanks (1)
avatar
By The Idiot
27th Jun 2014 16:31

Yes he does have considerable assets and what the payment is for is probably none of my business 

Thanks (0)
avatar
By The Idiot
27th Jun 2014 16:55

I'm not his accountant and have not implied that I am and therefore the finer details are not my business. Thought this forum was for help, advice, discussion and education and not for insults but evidently I was wrong

Thanks (1)
By mrme89
27th Jun 2014 17:02

This forum is for help, advice, discussion and education between accountants and tax advisors.

 

However, wherever questions like yours are posted, contributors will endeavour to help in most cases. Unfortunately, in your case, you are asking a question and giving limited information and are therefore not going to get a difinitive answer.

After trying to bleed the stone, your response is "it's none of my business". If it's none of your business, you probably shouldn't be asking the question in the first place.

 

People can only answer questions when sufficient information has been given. In this case, it hasn't.

Thanks (5)
avatar
By The Idiot
27th Jun 2014 17:16

I can only say please look up the spelling of definitive and don't be quite so pompous

Thanks (1)
avatar
By Ned Ludd
27th Jun 2014 23:16

I think the OP is saying that there has been an engagement for work on a subcontract basis and that the work has been paid for in full at the commercial rate.

As a quite separate issue the rich guy is proposing to give a gift of money to the other guy.

Unfortunately "The Idiot" no one really can give you a definitive answer as the initial subcontract engagement would almost certainly be considered by any HMRC Inspector of the gift was looked at and the efforts to glean the details on here were not to be awkward but to hopefully get a bit more info on which to base the decision. For example if the gift was for a wedding present then there are certain prescribed tax free limits for such.

Now let's assume that it is a gift and not some disguised remuneration for work performed.
It seems likely that the rich guy may have assets over £325k which means on death he will have an inheritance tax issue or at least the estate will. The gift therefore will come into play in that calculation should he die within 7 years of gifting it.

This is to stop people gifting away all their assets on thee death bed.

Thanks (2)
avatar
By The Idiot
30th Jun 2014 10:43

I don't think I've asked for a definitive answer!

Thanks (0)
Replying to Accountant A:
avatar
By Kirkers
30th Jun 2014 10:58

Actually

The Idiot wrote:

I don't think I've asked for a definitive answer!

You've asked what the tax implications are on both parties. Sounds quite definitive.

People have tried to help but you don't seem to want to provide the necessary information for anyone to help at all.

If you can't, then do the decent thing and tell your 'friend' to seek the advice of a accountant and provide all the info himself.

Thanks (2)
avatar
By The Idiot
30th Jun 2014 11:04

In answer to Kirkers

I have supplied the information that I know.

I would call it "asking for an opinion" or even "encouraging debate"

I have no need to tell my friend anything

Would suggest that you also try to be a little less pompous 

 

Thanks (0)
Replying to brian-scholar:
By mrme89
30th Jun 2014 11:14

?

The Idiot wrote:

In answer to Kirkers

I have supplied the information that I know.

I would call it "asking for an opinion" or even "encouraging debate"

I have no need to tell my friend anything

Would suggest that you also try to be a little less pompous 

 

 

You haven't supplied enough information to encourage a fart, let alone a debate.

 

If you had said from the outset, that this is the only information you know and will ever know, and that it has nothing to do with and you are only asking out of interest, we wouldn't have wasted our time trying to extract further information to give you a meaningful answer.

 

P.s Definitive – I can now spell it now that I’m on a computer and my iPhone doesn’t change it to difinitive!  

 

Thanks (6)
Replying to brian-scholar:
avatar
By Kirkers
30th Jun 2014 11:55

Pompous indeed

The Idiot wrote:

In answer to Kirkers

I have supplied the information that I know.

I would call it "asking for an opinion" or even "encouraging debate"

I have no need to tell my friend anything

Would suggest that you also try to be a little less pompous 

 

I am not being pompous. If you consider anyone trying to get blood out of a stone and actually answer your original question 'pompous' then you're going to have a tough time.

If you don't have all the information you cannot expect anyone to give you any sort of answer.

As for asking for an opinion or a debate - would you expect the same if you'd asked something like "what colour is the rug in my living room?" Because as it stands we'd probably have a better chance of guessing that than giving any sort of opinion on your original question. No details = no answer/opinion/debate. The only debate here seems to be between you and every other poster.

You have no need to tell your friend anything? Then why are you asking in the first place? 

The only one coming across pompous here (I see you've used that word for a few people) is you. 

You come on a forum for accountants and tax professionals, ask a question to which you intend to give no further information as it's 'none of your business' and then proceed to insult those who've worked hard to gain the knowledge that you clearly think is so cut and dry. Tax has many variables and I think you'll find when your so called friend either a) gets questioned by HMRC in regards to the 10k payment or b) goes to see an accountant about it, the first thing that will crop up will be the reason for the payment. So apologies on behalf of all here who have clearly overstepped the mark by asking such a simple question.

 

In my humble (and apparently pompous) opinion you are either the one receiving or gifting the 10k and wish to know how to avoid paying any/minimal tax on it.

I have never taken such an interest in a friend's financial affairs. By the sounds of it your 'friend' is capable of talking to an accountant themselves. 

 

Thanks (8)
Replying to DJKL:
By mrme89
30th Jun 2014 12:03

Brown

Kirkers wrote:

The Idiot wrote:

In answer to Kirkers

I have supplied the information that I know.

I would call it "asking for an opinion" or even "encouraging debate"

I have no need to tell my friend anything

Would suggest that you also try to be a little less pompous 

 

"what colour is the rug in my living room?" 

 

 

Guessing by the crap he's written, I'm going to go for brown.

Thanks (2)
Replying to DJKL:
avatar
By Kirkers
30th Jun 2014 12:04

But is there a rug in the first place?

mrme89 wrote:

Kirkers wrote:

The Idiot wrote:

In answer to Kirkers

I have supplied the information that I know.

I would call it "asking for an opinion" or even "encouraging debate"

I have no need to tell my friend anything

Would suggest that you also try to be a little less pompous 

 

"what colour is the rug in my living room?" 

 

 

Guessing by the crap he's written, I'm going to go for brown.

I'm going to say no rug at all.

Red herring!

Thanks (4)
avatar
By The Idiot
30th Jun 2014 11:17

... and you're the other pompous bloke from Friday

Thanks (0)
Replying to Tax Dragon:
By mrme89
30th Jun 2014 11:37

.

The Idiot wrote:

... and you're the other pompous bloke from Friday

 

Ah, you're iPhone must be giving you dodgy spelling too.

 

It's actually spelt helpful.

Thanks (5)
By mrme89
30th Jun 2014 12:17

I'd ask if he had a rug, but I'm not going to bother.

 

I don't have the time for 15 follow up questions to get the information I need to determine whether or not he has a rug, only to then be called pompous.

 

I think you could be on to a winner with no rug though!

Thanks (6)
avatar
By The Idiot
30th Jun 2014 13:37

This forum could do without aggressive and rude contributors like the pompous twins 

Thanks (0)
Replying to mr. mischief:
avatar
By Kirkers
30th Jun 2014 14:00

Pompous again?

The Idiot wrote:

This forum could do without aggressive and rude contributors like the pompous twins 

Nobody has been aggressive. Along with pompous I'm not sure you quite understand your own insults.

Before you became withdrawn and refused to answer any questions everyone was quite pleasant. You, in fact, received some useful advice.

This forum is for accountants and other professionals not people who ask a question, claim the details are none of their business and then waste everyone's time.

 

You've still not addressed WHY you want an answer anyway. Or in your words a 'debate.'

If the situation is none of your business and you don't have to advise your 'friend' of anything, as you say, why are you on here setting up an account and wasting people's time?

Pompous and aggressive? No.

Very defensive and insulting? Yes you seem to be.

Thanks (4)
avatar
By The Idiot
30th Jun 2014 14:12

There are two of you who are aggressive and rude. I perhaps unfairly called you the pompous twins. I have no issue with any other contributors. The behaviour however of you two borders on trolling.      

Thanks (0)
Replying to slipknot08:
avatar
By Kirkers
30th Jun 2014 14:23

Deary me

The Idiot wrote:

There are two of you who are aggressive and rude. I perhaps unfairly called you the pompous twins. I have no issue with any other contributors. The behaviour however of you two borders on trolling.      

I actually believe I tried to help before you starting getting so defensive. 

I have, in no way, said anything remotely aggressive.

Thanks very much for wasting everyone's time. Even now you can't respond to why you need an answer anyway. Clearly it was just to be a pain.

 

I don't see how I am being a troll. You created an account to ask to ask a pointless question, you have refused to provide further information and it is you who is wasting people's time. It seems it is just you who is trying to [***] people off.

I won't comment again, please feel free to have the last word. I'm sure it will make you feel better.

 

Thanks (3)
avatar
By simontill
30th Jun 2014 14:23

amusing

I Support Kirkers and MrMe89 comments

 

Has made this monday afternoon most amusing though with these comments

 

Thanks (5)
By mrme89
30th Jun 2014 14:24

The Idiot - Until you tell 

The Idiot - Until you tell  us if you have a rug or not, I will not be responding to any more of your comments.

 

Without the rug details, this thread is just ridiculous.

Thanks (10)
avatar
By The Idiot
30th Jun 2014 14:56

I would have preferred it if neither of you had commented in the first place. I'm sure you wouldn't behave like this face to face.

Thanks (0)
By mrme89
30th Jun 2014 15:07

I would have preferred face-to-face contact. Just so that you could see the disapointment in my face when you refused to give us details about the rug.

Thanks (3)
avatar
By The Idiot
30th Jun 2014 15:20

Lost interest in your rug references a long time ago I'm afraid

Thanks (0)
Replying to johnjenkins:
James Reeves
By James Reeves
30th Jun 2014 16:51

Aww c'mon,..

The Idiot wrote:

Lost interest in your rug references a long time ago I'm afraid

Over 800 people have viewed this thread and basically the only thing they really want to know is what colour the rug is.

Thanks (12)
avatar
By The Idiot
30th Jun 2014 17:29

Sorry Red Leader not sure who you think is digging and if it's me you are referring to then I have no idea where you are coming from

Thanks (0)
avatar
By The Idiot
30th Jun 2014 17:32

.. and just for the record Kirkers I don't see at what point I became defensive. I asked a question that came to me purely in casual conversation to which I thought might be worth a discussion on here. You and you mate have made far more of this than I have. 

Thanks (0)
Replying to [email protected]:
avatar
By User deleted
30th Jun 2014 19:03

16.55

The Idiot wrote:

.. and just for the record Kirkers I don't see at what point I became defensive. I asked a question that came to me purely in casual conversation to which I thought might be worth a discussion on here. You and you mate have made far more of this than I have. 

It was at about 16.55 if that helps.

I'm going for multi-coloured myself. This isn't getting the grass cut between football matches but it's made me snort out loud :)

Thanks (6)
avatar
By The Idiot
30th Jun 2014 17:41

your mate sorry for the typo

Thanks (0)
avatar
By emuroylian
30th Jun 2014 23:55

;)

Some sad weird people on here sometimes. This forum is for 'so called accountants and other professionals' as Kirkers keeps saying is pompous.

Idiot was answering all the questions asked but was the correct questions really asked.

As usual on these forums it's sad old accountants more interested in typos, being pompous to non accountants, and laughing at jokes that quite frankly are not funny (rugs).

I've underlined pompous especially for Kirkers as I know she/he likes underlining.

 

Thanks (2)
Replying to Retired Dave:
avatar
By Kirkers
01st Jul 2014 08:58

First line made no sense.

emuroylian wrote:

Some sad weird people on here sometimes. This forum is for 'so called accountants and other professionals' as Kirkers keeps saying is pompous.

Idiot was answering all the questions asked but was the correct questions really asked.

As usual on these forums it's sad old accountants more interested in typos, being pompous to non accountants, and laughing at jokes that quite frankly are not funny (rugs).

I've underlined pompous especially for Kirkers as I know she/he likes underlining.

 

You're funny.

Thanks.

 

Thanks (1)
Replying to Retired Dave:
By mrme89
01st Jul 2014 09:20

lol...

emuroylian wrote:

Idiot was answering all the questions asked but was the correct questions really asked.

 

... mega lol.

Thanks (1)

Pages