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taxable income?

taxable income?

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My client has a day job in which he earns c£75k.

He also writes text books as a separate exercise (but on a subject relevant to his employment) and now has income of c£20k per annum from this.  Last year we claimed the £1000 trading allowance against this income as his actual costs are not high, and will do so again this year.

During the tax year, one of his books was launched and he received c £1500 in "sponsorship" including £500 from his employer.  The other sponsors were the publisher and a couple of other businesses relevant to the subject of the book.  Most of the funds were used to pay for the cost of the book launch, which was at a restaurant, so most of the costs would be entertaining.  He spent about £300 less than he received.

I would be very interested to hear if you think this £1500 should be included as income for the year.  As we are claiming the trading allowance, we can't then claim any of the actual costs incurred (although most costs would be entertaining in any case).

I dont believe the sponsors received a significant amount of advertising in return for their contributions.

I am submitting this question not because I don't have a clue.  I have had a look at this point and drawn my own conclusions, but so little in tax is black and white and I really do appreciate the thoughts of others on some of these greyer areas in case someone brings up a  point which I might have missed.  Those amongst you who are sole practitioners and can't pop into the office next door to bounce ideas around with a colleague will understand where I am coming from.

In case anyone thinks I am being rude (see previous post where I was ticked off for not saying please), thank you most graciously for your attention and consideration.

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By jonharris999
30th Jun 2020 09:58

I vote - include £1K of the income, claim the £1K allowance = 0.

The £500 from the employer should be payrolled. It's a bonus.

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Replying to jonharris999:
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By snickersinatwix
30th Jun 2020 10:06

Thanks Jon. we have already claimed the £1000 TA against other income from his writing, so it will all be taxable. I am inclined to agree re the payment from employer, but as they have not payrolled it, I think we need to include it here.

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Replying to jonharris999:
By SteveHa
30th Jun 2020 10:11

jonharris999 wrote:

The £500 from the employer should be payrolled. It's a bonus.

I'm not convinced. If the payment can be shown to be the same in nature and reason as the other payments for the launch, then it's independent of his employment (assuming that the book itself is definitely independent of his employment, despite it having related subject matter), and so not subject to payroll.

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Replying to SteveHa:
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By jonharris999
30th Jun 2020 12:17

Interesting. I've come across few circumstances where payments to employees are deemed independent of employment. Most employment contracts/JDs say that the employee will provide "other services from time to time". Supplies appear inherently different to services: if I sell my employer a box of pencils that's s/e trading, but if I clean the kitchen and she slips me a tenner...that feels like employment.
I suppose it's possible that the book-writing is very separate in terms of subject-matter to the day job, but that feels unlikely.
If I were a PAYE inspector I might ask for a contract about the book sponsorship which is separate to the employment contract.

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Replying to jonharris999:
By SteveHa
30th Jun 2020 13:27

I agree that there are other factors to consider, hence my bracketed comment, but on the bare facts provided, I'd be looking at the possibility that it's a distinct, separate activity from employment.

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By snickersinatwix
30th Jun 2020 13:36

on the basis that the employer made the payment probably only because he was an employee (if I had written the same book, I don't suppose his employer would have sponsored my book launch) and I don't think they got too much in return, I did think HMRC may argue for employment income.

But..... as it has not gone through payroll, and will probably never be challenged, my conclusion was it should be included as taxable income in his self employment accounts

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