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?
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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."
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?
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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.
Gift??
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.
I see
So B is a subcontractor and not an employee?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
I also thought the £6,000 exempt amount was between family.. but I'm just looking for the guidance on that!
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."
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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?
IMO
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.Sorry I'm just answering the questions as they arise. I'm told it's a gift to help a friend.
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?
What about the questions Kirkers and I have asked?
You are going to struggle to get an difinitive answer at this rate.
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.
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.
Actually
You've asked what the tax implications are on both parties. Sounds quite definitive.I don't think I've asked for a definitive answer!
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.
?
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!
Pompous indeed
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.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
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.
Brown
"what colour is the rug in my living room?"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
Guessing by the crap he's written, I'm going to go for brown.
But is there a rug in the first place?
I'm going to say no rug at all."what colour is the rug in my living room?"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
Guessing by the crap he's written, I'm going to go for brown.
Red herring!
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... 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.
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!
Pompous again?
Nobody has been aggressive. Along with pompous I'm not sure you quite understand your own insults.This forum could do without aggressive and rude contributors like the pompous twins
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.
Deary me
I actually believe I tried to help before you starting getting so defensive.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 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.
amusing
I Support Kirkers and MrMe89 comments
Has made this monday afternoon most amusing though with these comments
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.
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.
Aww c'mon,..
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.
16.55
.. 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 :)
;)
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.
First line made no sense.
You're funny.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.
lol...
Idiot was answering all the questions asked but was the correct questions really asked.
... mega lol.