Newth Talks Tax - Is this taxable income?

Posted by AccountingWEB PM | on Mon, 28/01/2008 - 09:50 5078 1 comment

Is this taxable income?

John R, like many accountants, has had business dealings with an independent financial adviser, and in the past has received commissions in respect of the introduction of clients. These commissions have been treated as income and taxed accordingly.

Recently John R used the financial adviser to arrange a new pension for himself personally. The financial adviser waived the commission received on the policy, and offered two choices. One choice was for an amount equivalent to the commission to be invested in increasing John R’s pension fund.

Continued...

When does a Goodwill Gesture Offer choices?

Abacjm | Tue, 29/01/2008 - 03:19 | Permalink

Hi John
The Seller of the Policy would have received Commission as normal on all such policies. He could have kept it - as normal Instead he wishes to recempense his friend for all the business he has given him over the years - pefectly laudable. But then he, to my mind, makes the mistake of offering a choice. A ggodwill gesture, it can be argued is one wher there was no expectaion by the recipeient that such a gesture was forthcoming. Where one is givena choice in how to accept a backhander, it would seems to be more ceonnected to a bsuiness arrangement. presumably the donor has to account for the debit of this commission somewhere in his own Accounts?
Does he bank it and issues a personal cheque to his friend? To do with as he likes, even if it is to take him back out to lunch to thank him for his unsuspected "gift"?
On the other hand, is really so different, apart fom that it may be financial, from any Insurance Co. advertising for people to sign up and in return get a Camera, a DVD Player or one of the zillions of vouchers that M& S must issue annually?