Tax status of prizes

Tax status of prizes

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Our client a limited company, has won a monetary prize after entering and winning in an young entrepreneur's scheme developed by a bank. Is it taxable or not?

It involved doing a pitch of their business to a panel of judges.

The bank's scheme was developed to recognise the entrepreneurial talent emerging from universities across the UK.

Any help would be welcomed.

Replies (17)

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Portia profile image
By Portia Nina Levin
24th Oct 2014 13:59

How?

How is a limited company a young entrepreneur emerging from a UK university, exactly?

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Replying to Louise76:
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By buttinski
24th Oct 2014 14:22

Probably

University graduates who have started a business operating through a limited company.

Does this alter the validity of the question?

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Replying to lionofludesch:
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By Southbankdelboy
24th Oct 2014 15:13

Looks like it is taxable then

buttinski wrote:

University graduates who have started a business operating through a limited company.

Yes, that is exactly the position!

It would have been useful to have seen where the legislation says it is taxable. 

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By mrme89
24th Oct 2014 14:23

Who entered the competition / who was the prize awarded to? Mr Smith or Smith Ltd (represented by Mr Smith)?

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Portia profile image
By Portia Nina Levin
24th Oct 2014 14:26

My point

Is that it is not the limited company that is the entrepreneur. Is the prize awarded to the limited company owned by, and employing, the entrepreneur? or is it awarded to the entrepreneur?

In the first case, it is the fruits of the employer and definitely taxable.

In the second case, it may not be.

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By lexi
24th Oct 2014 14:26

Prize

I'd imagine it would be taxable because it is related to the trade (though as the above post notes, dependent on whether it is awarded the company itself represented by "Mr Smith" or awarded directly to Mr Smith). I'd assume the related costs of the pitch would be claimed too?

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By buttinski
24th Oct 2014 14:35

But

The OP says that the company has won the prize.

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Replying to In a Daze:
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By Portia Nina Levin
24th Oct 2014 14:52

Which

buttinski wrote:

The OP says that the company has won the prize.

Takes us back to my first question, and is why I asked it.

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Replying to spidersong:
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By buttinski
24th Oct 2014 14:56

Sorry

Portia Nina Levin wrote:

buttinski wrote:

The OP says that the company has won the prize.

Takes us back to my first question, and is why I asked it.

but you have lost me, so I will sign off.

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By Southbankdelboy
24th Oct 2014 14:52

Yes, it is the company that entered and won the award, which included the monetary prize, mentoring and a trophy.

It would be true to say that without the business there could be no award however the award is given in recognition of the overall achievement of what the company has done in relation to starting up, finding a niche market, it's use of information technology and to how the company has grown it's business. 

So if taxable, I'd be grateful if someone could please point me to the relevant piece of legislation.

 

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Replying to Wilson Philips:
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By Portia Nina Levin
24th Oct 2014 14:57

Oh Christ

I am out.

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Replying to Wilson Philips:
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By buttinski
24th Oct 2014 15:03

Your rather strange reaction has prompted me to re-read your original question.

Were you just being a smart 'chap' trying to pick fault with the question?

In which case you have wasted my time?

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Portia profile image
By Portia Nina Levin
24th Oct 2014 15:15

@ [***] Face

I did not waste your time. You wasted mine. The purpose of my first question was to extract the response that the OP gave in their post, for the purposes of determining the issue, as per my second post.

You were just an annoying noise in the background.

My "strange reaction" was to the OP's request was to show us where it says it, rather than offering to show us all where it does not say it.

Anyway, in a slighlt different context, BIM50710 does say it. It is not legislation though, as the OP requested. See http://www.hmrc.gov.uk/manuals/bimmanual/BIM50710.htm

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Replying to Lone_Wolf:
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By buttinski
24th Oct 2014 15:36

Dear Portia are you

naturally obnoxious or have you needed to work at it?

Either way I will follow the thread but not make any further contribution (not that you would agree that I did, I presume?).

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By Southbankdelboy
24th Oct 2014 15:25

Thanks for your reply, I had looked at that but it does refer to authors and literary profits so did not seem relevant.

 

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Portia profile image
By Portia Nina Levin
24th Oct 2014 15:54

BIM50710

I think that BIM50710 is merely an application of BIM40051 and BIM40055.

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By Southbankdelboy
24th Oct 2014 16:08

Ok then, to summarise if it's related to the trade then it is taxable and there is only case law on it, no legislation.

Thank you for your replies, much appreciated.

 

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