I would be grateful if someone could offer some help and guidance on a monthly settlement amount. This relates to a partnership to whom have agreed a settlement of £275.00 per week to a person who worked within the organisation and will be paid until her death or if and when the business ceases to trade. The person is not a partner in the business but previously used to pay themselves through drawings?? very strange. I was wondering if these payments of £275.00 are allowable for tax deduction. This settlement is not a redundancy payment as you are allowed up to £30k without paying tax it is an agreed some of money spread over numerous years dependent on mortality or the company ceasing to trade. The person receiving the funds will be responsible for their own tax and NI contributions. Thank you
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So it's an unfunded annuity?
The individual in question formerly receiving payment through drawings is more than strange - it does not make sense. What was the nature of the credits to the account out of which the drawings were taken?
If the individual in question was an employee of the business (which is not yet clear) the annuity payments to her should, I believe, be an allowable expense for tax purposes.
PS if these are annuity payments they should be subject to PAYE.
It comes down to what does "paid herself through drawings" mean? I asked what was the nature of the credits made to the account to which the "drawings" were debited.
If she was an employee my answer is as above.