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!
- Enquiry into tax return - how co-operative would you be? 338 8
- Halloween - do you celebrate it? 1,403 47
- Interest on HMRC contract settlement 160 3
- Goodwill gesture for providing work 431 12
- Share premium or Directors Loan 732 30
- VAT reconciliation and VAT return on Sage 107 3
- What would you do in this situation? 141 5
- Filing a P87 (professional fees) before year end. 133 2
- Recommendations for payroll/AE software? 603 13
- More HMRC on gov.uk 636 11
- Rollover relief - when does gain crystallise in this situation? 87 1
- Offshore company transferring assets to a UK individual. 341 14
- Interest Free Loan - Salay Sacrifice? 244 4
- Research and development - repayment timescale 220 5
- Sole trader hid directorships. 391 6
- NOVA 555 1
- Clearing payments on account/ Sage 50 275 10
- Regional Development Grant 124 4
- Problem ex client...again.. 2,416 21
- Company car without a salary 233 2
- Bonus Bonds 391
- Insolvency and whistle blowing 378
- Transfer of funds into recently set up company 289
- TPR imposes first penalty notice fines 258
- Box 8 VAT Return - deposit payment 187
- Husband proposes to buy the car as Director unable to acess finance 179
- Finance Lease 157
- Company Car Lease 154
- Form 42 149
- Demerger Reserve 132