I have a client who set up as a self employed artist in 2012. Prior to setting up she painted as a hobby and gave a couple of her paintings to a friend in America. He had built a property and the paintings were put in the property to help decorate for the purpose of selling the property. Due to the state of the American housing market it took a while for the property to sell but finally sold in 2014.
The friend had joked to my client that if he ever sold the paintings he would reimburse her for the materials cost of the paintings she had given him. He did as he said and gave some money to my client - the amount was in the region of £4000 so probably more than the actual material cost.
My question is whether this receipt of money should be included as self employed income or not taxable?
I have had discussions with HMRC but as I find is usual you get different opinions from everyone you speak to at HMRC.
My client 'gifted' the paintings to her friend with no expectations to receive any cash benefit.
My final discussion with HMRC was that it should be included as business income but it is up to me!
Any advice would be appreciated.
Replies (3)
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Optimist
There was no obligation on the payer to give the recipient the money.
It's a gift, imho.
I can't really see HMRC mounting a successful challenge. Too many variables coupled with not all that much at stake.
Looks like a gift
In these circumstances I can't see there was any measure of trading - it was an arrangement between friends. And that didn't include any expectation of remuneration.
I would treat it as a gift.
One suspects that the American friend probably added the £4,000 to the basis of the property on sale ...