Golden Handshake from Director, is this taxable?

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My client is an employee of an IT Consultancy company and has been for some time growing the comany along with the director. The company has been taken over and as a thank you the director has given him a £200,000 cash sum. 

This has been gifted from the director following the sale, is this taxable on the employee, or a gift and the director needs to worry about IHT.

My first thought is the employee has only recieved the cash becuase of his employment, however, who pays the Tax and NI as its not the company who have made the payment but the director out of his own personal funds after capital gains has been paid.

The employee and director have been kept on for the new company.

Replies (5)

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By bernard michael
14th Dec 2018 13:31

It's a gift subject to PET rules

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the sea otter
By memyself-eye
14th Dec 2018 13:41

A gift but Get it in writing, witnessed (by) and at a solicitor's office

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By Accountant A
14th Dec 2018 16:45

Gift seems the 'obvious' answer but we don't know what has been said about the payment (verbally and in writing) and when it was said - before, at the time and afterwards.

Saying "as a thank you" immediately suggests that the "gift" is some kind of reward for services rendered. eg, "If you help me push the sale through I will 'give' you £200,000".

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paddle steamer
By DJKL
14th Dec 2018 16:47

Sounds like disguised remuneration to me, but not an area I have ever had to deal with so maybe someone more knowledgeable might comment.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim45000

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By gbuckell
17th Dec 2018 10:50

Gift or not it is almost certainly subject to income tax being by reason of employment. To argue that it is personal strains belief.

Very bad tax planning but often the client tells you too late to do anything useful!

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