Most tax efficient way to receive a sum of money?

[oi_oi_savaloy]

When I left my last firm to join the one I'm at now I struck a deal with the owner that if any of my deals came off he'd pay me. well it looks like one of them is going to come to in. So is there a way to minimise the 40% tax due on this lump sum?

Thanks for any help in advance.

[roop]

With tapered relief, you should be able to get CGT down to 10% over a period of time. Without relocating to a CGT free residency, I can't see how you can drop the last 10%.

[Eric Mc]

What is the nature of the income?

Earned income?
Investment income?
Capital Gain?

It sounds like the former to me so it would be difficult to claim it was either of the latter.

If it is agreed that it is earned income, then the next question is, is it income from an employment or from a trade?
Whatver type of earned income it is will determine -

what type of expenses and allowances can be offset against it
what type of National Insurance liabilities arise (if any).

[raksp]

CASH!!!

[oi_oi_savaloy]

Eric - it would be a straight lump sum from the sale of a piece of land. And therefore it would be seen as earned income I guess.

I guess I'll just have to suck it up and accept that 40% of the total has to be given away.

Raks - can't take it as cash I'm afraid!

[Eric Mc]

Commission?

[oi_oi_savaloy]

Eric

Yes - it's effectively 2% of the land value (that's been agreed between the vendor and purchaser.)

I introduced the seller to the purchaser and for that I get 2% of the land value just to clarify things.

[Eric Mc]

It's effectively earned income.

Technically, you received it through your former employment and consequently, your old employer should have deducted PAYE and NI from the amount.

However, it is highly unlikley that this will actually happen. Therefore it is up to you to declare it ona Self Assessment tax return.

I would treat it as a "one off" payment under the "Sundry Income" area of the tax return rather than "Self Employed" earnings - on the assumption that it really was a "One Off" transaction.. This will ensure it is declared correctly.
I would offset against this any costs incurred by you in fulfilling your end of the arrangement (phone calls, travel etc) although I would imagine that these costs would be fairly minor in nature.

[oi_oi_savaloy]

Eric

Thanks for your advice - really appreciate it. Sundry income here I come!