Tax quandary: Personal Gift - Director to Employee

Tax quandary: Personal Gift - Director to Employee

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Discussion

pacoryan

Original Poster:

671 posts

233 months

Thursday 20th February 2014
quotequote all
If a Director of a Ltd Co wishes to make a personal cash payment from his taxed earnings to an individual who is also an employee, for their loyalty and commitment and being an all-round good egg, will HMRC seek to consider it as payment for employment? And thus tax the money again?

Bearing in mind the employee is salaried at a market rate to do their job, and the company is not making the payment, the Director is.

As an addendum, what if the Director was no longer a Director or an employee of the company (having retired for eg) but had been until recently?

RicksAlfas

13,445 posts

246 months

Thursday 20th February 2014
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If it's coming out of the Director's own (after tax) pocket, surely it's irrelevant?
Put the cash in a card or envelope and hand it over.

If the company is paying a thank you gift e.g. for long service, I believe there is a tax free allowance of £50 per year service.

Eric Mc

122,335 posts

267 months

Thursday 20th February 2014
quotequote all
A payment to an individual in recognition for their services as an employee is generally looked on as part of their remuneration - and would be subject to PAYE and NI - even if not actually directly paid out of company funds.

PAYE and NI can be chargeable on amounts paid to employees BY THIRD PARTIES. The payments don't have to be made by the employer.

If the payment is made as a personal gift by one individual to another individual and no mention of service or reward in respect of their employment is concerned, then it is a personal gift and has no PAYE/NI consequences.

pacoryan

Original Poster:

671 posts

233 months

Thursday 20th February 2014
quotequote all
Thanks Eric!

foliedouce

3,067 posts

233 months

Friday 21st February 2014
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Eric Mc said:
A payment to an individual in recognition for their services as an employee is generally looked on as part of their remuneration - and would be subject to PAYE and NI - even if not actually directly paid out of company funds.

PAYE and NI can be chargeable on amounts paid to employees BY THIRD PARTIES. The payments don't have to be made by the employer.

If the payment is made as a personal gift by one individual to another individual and no mention of service or reward in respect of their employment is concerned, then it is a personal gift and has no PAYE/NI consequences.
I have no doubt Eric is bang on in terms of the letter of the law but how much are you talking about?

If's it's thousands then I'm sure HMRC may take an interest, but if it's hundred's I'd just do it, it's highly unlikely to get on anyone's radar - you take cash out of the ATM from your taxed income for a gift. This happens everyday.

I have always put money into cards for my staff (when they get married other major events), around £250 a time which comes out of my personal bank account, out of my personal money post tax. It has nothing to do with the company and in 10 years it's never once been an issue.


Eric Mc

122,335 posts

267 months

Friday 21st February 2014
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Ah - the old, "it may be wrong but as long as no one notices....." line of advice.

pacoryan

Original Poster:

671 posts

233 months

Friday 21st February 2014
quotequote all
It's thousands, potentially, and will be completely above-board. And won't happen now! I suspect some form of share-scheme will make more sense for this employer.

foliedouce

3,067 posts

233 months

Friday 21st February 2014
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Eric Mc said:
Ah - the old, "it may be wrong but as long as no one notices....." line of advice.
Not at all Eric, but I take exception with HMRC making demands on someone that has given money from taxed income.

My business pays a six figure sum each year in PSA for staff benefits, and we are a small business, but if they came after me for the £250 I had personally put in a wedding card, I'd fight it out of principle.


Eric Mc

122,335 posts

267 months

Saturday 22nd February 2014
quotequote all
foliedouce said:
Eric Mc said:
Ah - the old, "it may be wrong but as long as no one notices....." line of advice.
Not at all Eric, but I take exception with HMRC making demands on someone that has given money from taxed income.

My business pays a six figure sum each year in PSA for staff benefits, and we are a small business, but if they came after me for the £250 I had personally put in a wedding card, I'd fight it out of principle.
If it IS a personal gift and NOT from the business and NOTHING to do with the employee's service AS an employee - then you will NEVER pay tax on the amount and have no reason to resort to subterfuge.