Giving a gift to a tradesman rather than paying....
Discussion
The correct answer is that payment does not have to be made in money. It can be made in kind. It is still a payment and subject to the same accounting, tax and VAT rules as any other financial transaction.
If the trader fails to declare the income he has received from this job - however it has been paid - he will be committing both a financial and tax (and possibly a VAT fraud) as well. It's up to him to decide what side of the line he wants to thread.
If the vehicle you intend to "gift" was a business asset i.e. an asset from your own business on which you had claimed the relevant Capital Allowances, then you would also be required to declare its "sale" and amend your Capital Allowance computations accordingly.
As for the comment "how will HMRC hear about it"? You could say that about all sorts of financial transactions. The law says that the individual or company is obliged to declare it. To fail to do so is a criminal offence.
If the trader fails to declare the income he has received from this job - however it has been paid - he will be committing both a financial and tax (and possibly a VAT fraud) as well. It's up to him to decide what side of the line he wants to thread.
If the vehicle you intend to "gift" was a business asset i.e. an asset from your own business on which you had claimed the relevant Capital Allowances, then you would also be required to declare its "sale" and amend your Capital Allowance computations accordingly.
As for the comment "how will HMRC hear about it"? You could say that about all sorts of financial transactions. The law says that the individual or company is obliged to declare it. To fail to do so is a criminal offence.
I run a small business as a blind supplier/ fitter.
Frankly I think it is absurd that I couldn't put up a blind for a friend in return for them buying me dinner, without informing the tax man That I have earned myself a meal with my own labour.
Just scale up this concept up a bit and we have the situation the OP is describing.
Bartering should not be illegal IMO.
Frankly I think it is absurd that I couldn't put up a blind for a friend in return for them buying me dinner, without informing the tax man That I have earned myself a meal with my own labour.
Just scale up this concept up a bit and we have the situation the OP is describing.
Bartering should not be illegal IMO.
Shuvi McTupya said:
I run a small business as a blind supplier/ fitter.
Frankly I think it is absurd that I couldn't put up a blind for a friend in return for them buying me dinner, without informing the tax man That I have earned myself a meal with my own labour.
Just scale up this concept up a bit and we have the situation the OP is describing.
Bartering should not be illegal IMO.
It is not illegal.Frankly I think it is absurd that I couldn't put up a blind for a friend in return for them buying me dinner, without informing the tax man That I have earned myself a meal with my own labour.
Just scale up this concept up a bit and we have the situation the OP is describing.
Bartering should not be illegal IMO.
But it is taxable.
It's NOT illegal. You are free to sell what you like to whom you like (within reason)- whether the customer is a friend or not.
Just because cash did not change hands does not mean a sale didn't take place.
My comments were in respect of someone who already is running a business and chooses to settle a business transaction using a barter arangement rather than cash. That is still a normal business transaction and HMRC will expect it to be recorded in the normal way and any VAT or Income Tax/Corporation Tax accounted for on it.
If you are NOT running a business and carry out the odd small scale swapsie with a friend or family member, HMRC will by and large, not be interested.
Just because cash did not change hands does not mean a sale didn't take place.
My comments were in respect of someone who already is running a business and chooses to settle a business transaction using a barter arangement rather than cash. That is still a normal business transaction and HMRC will expect it to be recorded in the normal way and any VAT or Income Tax/Corporation Tax accounted for on it.
If you are NOT running a business and carry out the odd small scale swapsie with a friend or family member, HMRC will by and large, not be interested.
Both I and the tradesman mentioned in the OP are running a business though, so my position stands!
It is theoretically illegal for me to install a blind as a favour if I get goods or services from another person who is self employed. From what you saying though, those on PAYE can indulge in barter without paying the government ?
It is theoretically illegal for me to install a blind as a favour if I get goods or services from another person who is self employed. From what you saying though, those on PAYE can indulge in barter without paying the government ?
Shuvi McTupya said:
Both I and the tradesman mentioned in the OP are running a business though, so my position stands!
It is theoretically illegal for me to install a blind as a favour if I get goods or services from another person who is self employed. From what you saying though, those on PAYE can indulge in barter without paying the government ?
that's not what Eric is saying at all and I think he has already given you a decent reply regarding HMRC's position on individuals doing the odd favour (which would fall well short of a £15k 'gift' for somebody who is providing them with exactly what they provide other customers and expect to pay tax on in other circumstances). It is theoretically illegal for me to install a blind as a favour if I get goods or services from another person who is self employed. From what you saying though, those on PAYE can indulge in barter without paying the government ?
Exactly.
If you are running a business and decide to complete a transaction or a set of transactions by settling the obligation to pay by means of a "swap deal" - and then deliberately deciding not to record this set of transactions properly in your records.- you will be committing a tax fraud.
There is no other definition for what you are doing.
Note that the "swap deal" itself is not a problem. It's the deliberate omission of the details from the records that's the criminal offence.
If you are running a business and decide to complete a transaction or a set of transactions by settling the obligation to pay by means of a "swap deal" - and then deliberately deciding not to record this set of transactions properly in your records.- you will be committing a tax fraud.
There is no other definition for what you are doing.
Note that the "swap deal" itself is not a problem. It's the deliberate omission of the details from the records that's the criminal offence.
Out of interest Eric,in such a scenario of payment via 'gift' work in return etc how is the value of such a 'favour' arrived at/recorded ? ie, i could offer to re surface a driveway in return and that work,if charged for, could be open to interpretation much like say 2 quotes for the same work could be several thousands apart.....is it taken 'on trust' ?
Much of UK taxation is based on the principle of "Self Assessing" i.e. the legal obligation is on the taxpayer to correctly record and report the true value of transactions.
If the taxpayer chooses to materially undervalue or overvalue a transaction or series of transaction in order to gain a tax advantage, it is likely that they will be committing both an accounting and tax fraud.
At the end of the day, the taxpayer has to make the decision as to which side of legality they want to thread and live with the risk if they chose to overstep that line.
If the taxpayer chooses to materially undervalue or overvalue a transaction or series of transaction in order to gain a tax advantage, it is likely that they will be committing both an accounting and tax fraud.
At the end of the day, the taxpayer has to make the decision as to which side of legality they want to thread and live with the risk if they chose to overstep that line.
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