Referral fee from a recruiter - tax?

[Puggit]

I've put a candidate forward to a recruiter recently, who has promised me a finder's fee if the candidate is successful. I understand these payments are normally £500 - £1000.

I'm wonder what the tax implications of such a gift are? This is entirely outside of my employment - so not subject to PAYE etc.

[prand]

Sorry for not knowing the answer, but you will be the first person I know to get any sort of finder's fee. Well done if you actually get it!

[cbmotorsport]

You'll need to put it on your tax return, and it will be taxed.

Can they not pay you cash?

[The Leaper]

And what difference does payment in cash make as far as a tax return is concerned?

R.

[bogie]

Depends on your tax rate, but yeah, you have to pay tax on it just like other income. Put it on your tax return as other earnings.

No different to getting any other kind of bonus......

[Funk]

Deffo not a 'gift' I'm afraid Puggit... As others have said, needs to go on tax return as other income at whatever rate is due...

[Puggit]

Thanks all - bloody taxman

[98elise]

prand said:

Sorry for not knowing the answer, but you will be the first person I know to get any sort of finder's fee. Well done if you actually get it!

That's my experience as well. I got approached for a contract but couldn't do it. I recommended a mate, and did the initial contact etc.

Finders fee was £200. As soon as he got the job they ignored any emails from me.

[Funk]

98elise said:

That's my experience as well. I got approached for a contract but couldn't do it. I recommended a mate, and did the initial contact etc.

Finders fee was £200. As soon as he got the job they ignored any emails from me.

At least you know who never to deal with again in future, either for yourself or a recommendation.

Seems crazy for a recruiter to st on their own doorstep like that over £200!

[The Moose]

The Leaper said:

And what difference does payment in cash make as far as a tax return is concerned?

R.

You know FULL WELL what difference it makes!

[Eric Mc]

The Moose said:

The Leaper said:

And what difference does payment in cash make as far as a tax return is concerned?

R.

You know FULL WELL what difference it makes!

It may mean you are contemplating not declaring it - which also means you may be contemplating tax fraud.

Cash income is perfectly legal - but it is declarable like any other income.

And it is most definitely not a gift. It's a payment for a service provided - which means it is taxable earnings.

[anonymous-user]

Eric, in principle why would this be taxed, its not earned income from an employer and its not income from a trade, if you only do it once?

[Eric Mc]

Berw said:

Eric, in principle why would this be taxed, its not earned income from an employer and its not income from a trade, if you only do it once?

It is earned income for "work done" - so it is taxable.

It is, in effect, a one off "self employed" fee and should really be returned under self employment regulations. However, because the individual has not formally set up as a formal "sole trader", HMRC will accept the amount being entered on the self assessment tax return under "Sundry" income.

Because it is technically "self employed" income, the OP can deduct from it reasonable costs and expenses related to the income - such as travel costs, stationery etc.

If the fee (less costs) exceeded the lower NI threshold, the "profit" from the activity would also be subject top Class 2 and Class 4 NI (unless the OP has already exceeded the maximum NI amount under his employment..

[anonymous-user]

Thanks Eric, as I always say when I ask you a question, my UK tax 20 years out of date, in the old days of Schedule D, a one of wouldn't have been classed as a trade,

[The Leaper]

The Moose said:

You know FULL WELL what difference it makes!

Yes, I know full well. I was surprised that the poster suggesting it was advocating a fellow PHer may contemplate committing tax fraud

R

[Eric Mc]

Berw said:

Thanks Eric, as I always say when I ask you a question, my UK tax 20 years out of date, in the old days of Schedule D, a one of wouldn't have been classed as a trade,

I'm not sure about that to be honest. The fact that it is a "one off" is not what determines what category of income it falls in. You could have a "one off" payment processed under PAYE if the income was of an employment nature (I've come across that a few times). It might be of a self employed nature (as in the OP's case). It might even be "rental income" in certain cases.

The duration of time spent in the activity is not what determines the taxable category into which it falls.

[oyster]

cbmotorsport said:

You'll need to put it on your tax return, and it will be taxed.

Can they not pay you cash?

Why would the recruiter want to do 'that'?

They could not then offset the finders fee as a cost to their business.

[Taxman10]

Berw said:

Thanks Eric, as I always say when I ask you a question, my UK tax 20 years out of date, in the old days of Schedule D, a one of wouldn't have been classed as a trade,

Would have been d VI in olden days, other income.