I, for my sins, do my brother's tax return each year. During this year, he has won a cash prize as part of a film festival award for a film he recently directed. He is registered, for tax purposes, in the UK as a self-employed director. I know that winnings are generally non-taxable unless it is part of the trade e.g. professional gambler, purses for boxers etc. Does this prize fall within that scenario? You could argue that his trade is not to win prizes but, knowing the Revenue, this would be a tenuous argument as it is as a result of his trade.
There are added complications, which is hardly surprising knowing my brother, in that the prize money was won in a different country and not all of the prize made its way back to his bank account. The cheque was signed across to the production company and used to clear the budget overspend and the balance was then paid to him by the company. This company is registered outside of the UK. If he has to recognise the prize money as taxable income, can he get relief for the amount used to clear the overspend and only pay tax on the net receipt to him?
The final twist, he is a director of the production company and did not take a fee for directing the film due to budget constraints. If the prize money is non-taxable, could the reroute of the money on its way to him turn the amount he received from the production company into a taxable fee for working on the film?
Not being a tax expert, maybe I am seeing more complications or twists in this than actually exist. Look forward to any responses.