Help! Is this cash gift subject to income tax?

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Hi, could i please get some assistance on whether this gift is taxable?

I am a PAYE employee of Company A who provide services to Company B. 

I have received a cash gift from an employee of company B as a thank you for the assistance I have given them over the past year. The gift was in cash and was a gift from the employee personally to me personally. (i.e. not paid through either company). The gift was over £1k so not a trivial amount. 

Would this gift be exempt from income tax or do i have to declare this as taxable income? 

Replies (41)

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By Paul Crowley
01st Jan 2021 15:27

Your employer is meant to know if the other employer rewards you, eg free holiday for good sales performance
It appears you got a tip with no tronc master involved
Did it arise from your employment?
If yes taxable

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Replying to Paul Crowley:
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By Paul Crowley
01st Jan 2021 15:30

Two gifts quick quickly suggests a different issue
Do you award contracts and............

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Replying to Paul Crowley:
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By Paul Crowley
01st Jan 2021 15:37

Would the two employers consider the payments to be a normal thing in your industry or in some way odd or inappropriate

No longer think your prior answers received are apposite this this question

I employ my daughter, so if I give her a Christmas present, it is not taxable. She got cos she is my daughter. If my company pays, it is taxable

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Replying to Paul Crowley:
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By DJD18
01st Jan 2021 15:43

Thank you for your input

there is no bribery or anything untoward involved. Just a generous client.

I have advised my employer, followed all protocols etc. and they confirmed they are happy for me to keep the gift.

the issue is purely whether or not I am liable for taxation.

I understand your point that having arisen from employment it is likely to be taxable.

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Replying to DJD18:
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By Paul Crowley
01st Jan 2021 15:45

So is it different from the tips I give at a restaurant for good service

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By Tax Dragon
01st Jan 2021 15:36

I promise you you will get "yes" votes and "no" votes. So then what will you do?

Truth is, there's not enough info in what you have told us to be 100% sure. However, HMRC's starting point would be that you received the money only because you undertook work as an employee. Consequently, the default position is likely to be that it is taxable and it is on you to prove otherwise.

You really also ought to notify your employer about the gift.

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Replying to Tax Dragon:
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By DJD18
01st Jan 2021 16:00

Thank you for your input.

I'm not surprised that I may get votes both ways. Prior to posting I read through the HMRC website for guidance and was getting confused by what gifts are / are not taxable (hence raising the question on this forum to more knowledgeable people)

If its taxable then its taxable. I'll speak with the HMRC.

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Replying to Tax Dragon:
RLI
By lionofludesch
01st Jan 2021 18:18

Tax Dragon wrote:

I promise you you will get "yes" votes and "no" votes. So then what will you do?

Oooh - I love a vote.

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the sea otter
By memyself-eye
01st Jan 2021 15:36

Not taxable - get the donor to put in writing that it is a gift.

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Replying to memyself-eye:
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By Paul Crowley
01st Jan 2021 15:43

And make sure both employers know, subject to the industry you are in this could be a problem

I am really trying not to use the nasty word beginning with B
Cos it sure as hell is not commission

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Replying to Paul Crowley:
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By DJD18
01st Jan 2021 15:45

Both employers have been made fully aware.

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Replying to DJD18:
the sea otter
By memyself-eye
01st Jan 2021 16:20

Fine - you have no problem....

Gawd, there are more things in heaven and earth.....

Hamlet act 4 scene 3

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Replying to DJD18:
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By Paul Crowley
01st Jan 2021 16:49

Good
That puts the problem back to your employer
Has the employer reported it to the wages and p11d people?

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Replying to memyself-eye:
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By Tax Dragon
01st Jan 2021 17:12

memyself-eye wrote:

Not taxable - get the donor to put in writing that it is a gift.

Using Paul's restaurant tips analogy, do you think they'd not be taxable if only Paul had the sense to put in writing that they were gifts?

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Replying to Tax Dragon:
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By Paul Crowley
01st Jan 2021 20:21

An aside
I have a part time employee, who in his other job gets tips from me.
It is a restaurant, no idea if the tronc exists.
Could it be argued that the tip is really untaxed remuneration to an employee?
Unlikely, but then vans being taxed as cars also seemed unlikely.

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By jonharris999
01st Jan 2021 16:40

It really depends on what the reason behind this gift was.

For it not to be taxable you really have to have 'done' nothing for it, or only things which friends do for each other (and if anyone wants to make a follow-on joke about 'benefits' now that I've used the word 'friends', go for it).

But it sounds more like this was something to do with your employment, so that's equivalent to a taxable tip; or you provided some other advice or service, which is self-employment (and you're over the £1K limit).

Concerns about bribery etc seem probably to be assuaged by all the parties knowing about and being comfortable about it.

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By bernard michael
02nd Jan 2021 09:06

Is the employee of B also a director/shareholder of B ??

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By insolventnl
02nd Jan 2021 11:42

Would you have got this gift had it not been for your employment? I think that should help you decide if it is employment related or not

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By fawltybasil2575
02nd Jan 2021 12:48

@ DJD18 (OP).

Your initial question states that the payment is by way of a “thank you for the assistance I have given them”.

Impliedly, this must I assume refer to “assistance” in relation to the services supplied by you (on behalf of your employer) to the payer (on behalf of Company B).

On the above assumption, one would need more precise details of the “assistance”, to enable one to determine whether that assistance related to (i) duties in the field of your employment, or whether alternatively (and exceptionally) it related to (ii) services provided by you NOT in the field of your employment. Frankly, without knowledge of the specific “assistance” given by you, I would be (say) 90% certain that (i) applies.

If (i) does indeed apply, then a letter from you to HMRC, to advise of your having received the over £1,000, is appropriate, simply stating that you have “received, in the course of my employment, a voluntary payment of £xxxx (on xx/xx/xxxx), from an employee of a company to which my employer has provided services, and I wish to account to you for any Income Tax payable thereon: please forward to me an appropriate payslip to enable me to make payment: or alternatively confirm that, in view of the relative immateriality, you do not wish me to make such payment”.

In the less likely event that (ii) applies, then a letter to HMRC is advised, on the lines of :-

“In the course of my employment with xxx ltd, I have received (on xx/xx/xxxx) a voluntary payment, from an employee of a company to which my employer has provided services, of £xxxx. I believe that such payment (since it relates to services supplied by me outside the field of my employment) is in the category of “other income” and that, as such, the first £1,000 is not subject to Income Tax. This therefore leaves £xxx taxable - since the Income Tax thereon is minor, may I suggest that HMRC confirm to me that no payment is required by you - if however you wish me to make payment, please forward to me a payslip, within the next 30 days”.

[I have intentionally included the words “other income”, in the above suggested letter extract, NOT “self-employment”. That third category (the other two of course being employment income and self-employment income) “other income” category is often overlooked: since the "assistance" is presumably of a “one-off” nature, and since the “badges of trade” do not appear to point to there being a “business”, then self-employment would not be the correct category].

Basil.

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Replying to fawltybasil2575:
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By Tax Dragon
02nd Jan 2021 13:03

fawltybasil2575 wrote:

If (i) does indeed apply, then a letter from you to HMRC... is appropriate.

Or... just include it in the SA102. (On the assumption, not displaced by anything that's been said - that I've noticed, anyway - that the OP is under Self Assessment.)

(I make no comment on (ii). I've not thought about it. But it's 9:1 against being relevant, on your reckoning.)

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By fawltybasil2575
02nd Jan 2021 13:44

@ Tax Dragon (your post at 13.03).

The advantage of adopting the “letter to HMRC” strategy (as per the paragraph of my last post commencing “If (i) does indeed apply") is that, if HMRC agree to disregard the potential tax liability (in response to the closing request in that paragraph to "alternatively confirm that, in view of the relative immateriality, you do not wish me to make such payment”) then:-

(i) If no Tax Return is required for the relevant tax year (presumably 2020/21 in this case), the OP pays no Income Tax on the over £1,000,

(ii) If a Tax return IS required for the relevant tax year, the OP does not need to show the amount as income received on that Tax Return (albeit a “white space” note on that Return, making reference to the recommended letter to HMRC, is recommended).

Re (ii) therefore, I would respectfully suggest that your alternative suggestion of simply showing the over £1,000 on the Tax Return could result in the OP’s paying Income Tax which he would otherwise not be required to pay.

Basil.

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Replying to fawltybasil2575:
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By Tax Dragon
02nd Jan 2021 14:35

Just to make sure you know what you are saying, you are recommending that someone under self assessment should knowingly and deliberately understate their employment income in their tax return. I'd like you to reflect on that for a moment, and see whether you have said quite what you intended.

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Replying to Tax Dragon:
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By fawltybasil2575
02nd Jan 2021 14:57

@ Tax Dragon.

With respect of course, I have NOT recommended the submission of an incorrect Tax Return.

To the contrary, I have stated that IF one obtains prior written confirmation, from HMRC, that they regard the amount received as NOT constituting taxable income (such that they do not wish to collect Income Tax on it) then it is in order to exclude such amount (to reaffirm, in accordance with their prior agreement) from that Return.

In the interests of openness, furthermore, I also added that it is appropriate to include a “white space” note, on the Return, alerting HMRC to that prior written agreement.

I trust that my advices are now clear.

Basil.

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Replying to fawltybasil2575:
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By Tax Dragon
02nd Jan 2021 18:04

There's a difference, isn't there, between HMRC saying they wouldn't seek to collect tax (by which I take it you mean raise an assessment, as I don't think that tax is due unless assessed, whether by the taxpayer or by HMRC) and saying that the income is not taxable?

So, whilst your advice might be clear to you, I regret that it remains slightly cloudy to me. However, you have shown in other discussions with other contributors far more eminent than I that you will defend anything and everything you say. So, as our whole little side discussion may be of no relevance to the OP anyway... I'm happy to remain slightly hazy (sorry for the mixed metaphor) about what you mean.

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By Paul Crowley
02nd Jan 2021 15:09

Fair play for integrity of OP
If only more taxpayers showed same integrity

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By fawltybasil2575
02nd Jan 2021 15:35

I endorse Paul’s comments (15.09 post).

With hindsight, and whilst now academic, it would have been possible (probably- see “caveat” below) to achieve the effect desired by the Company B employee, by other means (to avoid the seeming unfairness of Company B employee’s not obtaining tax relief on the money paid to the OP).

One of the “other means” would have been for the Company B employee to forego £x (the amount which he paid to the OP) from his pay, with Company A paying the OP the same”£x” amount; Company B to then pay that same additional “£x” to Company A.

The “caveat” is that one would have needed to ensure that no LEGAL breaches arose from the arrangement (including Employment Contract/NMW matters).

Basil.

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Replying to fawltybasil2575:
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By Tax Dragon
02nd Jan 2021 17:54

fawltybasil2575 wrote:

I endorse Paul’s comments (15.09 post).

Absolutely. I'd been quietly (ie to myself) applauding the OP too, and am quite happy to do so here publicly.

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By fawltybasil2575
02nd Jan 2021 19:08

@ Tax Dragon (your post at 18.04)..

Re your first paragraph, I must assure you that when I referred to asking HMRC to consider not seeking payment of Income Tax, implicit therein was their acknowledging that the amount received was not taxable (a point which I made in my 14.57 post- second paragraph).

Re your second paragraph (the second sentence refers) I am disappointed at the allegations of ill faith therein, but I have no desire or intention to engage at that level.

Basil.

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Replying to fawltybasil2575:
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By Tax Dragon
02nd Jan 2021 23:09

Well, yes, I guess if HMRC put in writing that the taxable income is not taxable income, then one might omit it, even against one's better judgment.

In truth, however, that all seems a bit far-fetched and/or fanciful. For any taxpayer already with a UTR and to whom a Notice to File had been issued, a more likely response by far from HMRC would be to the effect that it is for the taxpayer to determine the taxability of the receipt in question.

I regret that you see allegations of ill faith in my remarks. I was unaware I had made any such allegation. I too do not wish to engage at that level.

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Replying to Tax Dragon:
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By whitevanman
03rd Jan 2021 19:48

As often happens, I find myself agreeing with most (if not all) of what you say.
I would add a few words of my own to the discussion.
There are 2, legal, requirements that are, potentially relevant.
If the OP is already within SA, (S)he will receive a Notice to File for the relevant year and will therefore need to decide whether the sum is taxable and return it as appropriate.
If outside SA, (s)he has the responsibility to decide whether the sum is taxable and if so, to Notify chargeability within the relevant time. There is no requirement to notify something that is not chargeable!
When notified, it is likely to lead to a Notice to File being issued and again a self-assessment being required.
The important thing here is that we have a system of SELF -Assessment. The onus is on the individual not HMRC.
Also, at each stage, the OP needs to be satisfied that any decision reached (as to taxability) is in accordance with legislation and case law.
In practical terms this is only an issue if deciding the sum is not taxable as that could give rise to penalties if incorrect.
As a belt and braces approach, if the OP concluded that the sum is not taxable and (s)he is within SA (and so receives a Notice to File) full details should be included in the white space saying why the conclusion had been reached.
The idea of asking HMRC to decide and send a payslip etc is against the self-assessment principle and not likely to prove as successful as Basil suggests.
The unfortunate thing is that there is no likelihood that a non-statutory clearance could be sought (I seem to recall it was for businesses only!).
Based on the limited info provided, I am with the majority here; it is taxable. So the OP should, IMO, do what is legally required.

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Replying to whitevanman:
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By Tax Dragon
04th Jan 2021 06:23

whitevanman wrote:

The idea of asking HMRC to decide and send a payslip etc is against the self-assessment principle and not likely to prove as successful as Basil suggests.

Until Basil clarified that that was what his suggested letter was intended to achieve, I had no idea that it was "asking HMRC to decide". This probably accounts for the apparent (and regrettable) misunderstanding between us (Basil and me us, not you and me us).

I remain pessimistic that the response to "I wish to account to you for any Income Tax payable thereon: please forward to me an appropriate payslip to enable me to make payment: or alternatively confirm that, in view of the relative immateriality, you do not wish me to make such payment" (especially given the lack of information included about the payment) would be "Dear Taxpayer, we are not concerned about the materiality here, as the payment is not, in any event, taxable" (or words to that effect).

Let me add: I remain slightly concerned that Basil thinks his letter did ask that question, because it really did not. My concern then becomes that Basil would interpret an "OK we won't collect the tax" type response as meaning "we agree it's not taxable". Hence my opening sentence at 18:04 on the 2nd.

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Replying to Tax Dragon:
RLI
By lionofludesch
04th Jan 2021 07:06

There's a lot of talk of self assessment here but I can't see where the OP has said that he has been required to complete a return.

Perhaps he would confirm whether the taxpayer completes a SA return or whether this will be dealt with by HMRC's crazy Simple Assessment system.

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Replying to lionofludesch:
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By Tax Dragon
04th Jan 2021 09:39

lionofludesch wrote:

There's a lot of talk of self assessment here.

That's a useful reminder. @OP, IMHO all that needed saying about the position on the assumption that you file tax returns had been said by the end of 13:03 on 2nd Jan. All* the discussion since then continues that assumption, though you would be forgiven if you hadn't appreciated that prior to Lion's intervention.

*except whitevanman's additional comments about notifying chargeability.

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Replying to Tax Dragon:
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By whitevanman
04th Jan 2021 18:22

What I hoped to convey (but may have failed) is that, as we are in a SA system, a letter that says "I have some taxable income etc" is only likely to result in a SA return being required. Conversely, a letter that says "it isn't taxable" would, possibly be viewed as a "nothing" and I doubt HMRC would be prevented from a discovery at some later time. The reason is that the client was not in fact "notifying chargeability" but was saying it wasn't chargeable. One for the Tribunal possibly but I wouldn't advise a client to rely on it.
My own view remains therefore, that the OP should decide whether it is taxable. If "yes" it goes on the SA return or is notified to HMRC as a chargeable amount and they are then left to take appropriate action. Should they fail to do so, they would then be debarred from a subsequent discovery.

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Replying to whitevanman:
RLI
By lionofludesch
04th Jan 2021 18:33

For one-off £1000 income, tax £200, I'm not so sure. Simple Assessment is the way I think they'd go.

It's what they did with £1200 of interest on my late mother's estate. We sent a letter, they wrote back saying send us some money, job done. No forms required.

It's the new way.

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Replying to lionofludesch:
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By whitevanman
04th Jan 2021 18:49

I agree it is a possibility (unless already within SA) and comes within the "appropriate " action mentioned in my last post. What will not happen, IMO, is for HMRC to enter into correspondence about materiality etc.

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Replying to whitevanman:
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By lionofludesch
04th Jan 2021 19:12

No. You'd get a letter asking for money or you'd never hear anything.

It's a bit like the "on boarding" charges on another thread. Too much admin to set up an SA account, issue a form, get it filled in - all for the sake of £200.

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Replying to lionofludesch:
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By Tax Dragon
04th Jan 2021 20:51

My only word on the non-SA position (scenario (ii), IIRC): if it's employment income (which it likely* is)... tax could, presumably, simply be coded out.

*Between 9:1 and 19:1, depending on who's opining**.
**Filling in the blanks.

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Replying to Tax Dragon:
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By Tax Dragon
04th Jan 2021 20:55

Tax Dragon wrote:

(scenario (ii), IIRC)

Just checked. I don't (RC).

It's (i)(i).

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paddle steamer
By DJKL
04th Jan 2021 21:32

Having read this thread, which was very interesting, the one question still unanswered is,

who is this employer that pays their staff so much that a member of their staff is prepared to use £1,000 of their salary (after presumably tax and NI) as a present to a supplier to their employer?

I think I really need to rethink my career choices.

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Replying to DJKL:
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By whitevanman
04th Jan 2021 22:53

In my experience, it was more typical to find that whoever was responsible for paying expenses claims, seemed to think it was coming out of their own pockets!

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