Tax treatment of lump sum in return for income stream? Tax treatment of income stream?

I have a UK client company which is to be paid £4300 a month for 97 months.  The client wants to sell this income stream for an up front lump sum payment.  This will be approximately £325,000, giving the person paying the lump sum a return of approximately 6% per annum gross.

Any ideas regarding the correct tax treatment?  Does my client treat the lump sum as a trading receipt in year one (the monthly payments are being received under a contract for partnering support, which is part of the company's trade).

And what about the tax treatment for the individual receiving the income stream?  The receipts of £4,300 will be part capital and part income - is there an HMRC formula to calculate the income element?  Does tax have to be deducted at source on any element?

Thanks for any advice.

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Income streams

thisistibi |
thisistibi's picture

Interesting one

Paul Scholes |
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