Best way to gift/give money to a small business?
Discussion
Back in 2017, I had a bad motorbike accident. My partner effectively put her life/business completely on hold for 6 months to look after me.
I’m due some compensation to finally arrive in the next few weeks, after a long battle over liability and agreeing a settlement figure. I would like to put some of that cash (£25-30k) into my partner’s business. She’s a vet with a small, specialist practice and to be honest, even £25-30k won’t go far with the price of diagnostic imaging or other veterinary equipment.
I’m aware that if I just give her the cash, there will be tax liabilities, so what is the best way to (legally, obviously) minimise any tax due/invest in her business? She did a lot of looking after me and my dog while I was incapacitated, but didn’t charge me a penny for any of her time. She has easily lost the amount I’m suggesting by not working for the hours she was looking after me/my dog since 2017.
I obviously don’t want to do anything illegal, but I do want to make sure she gets as much of the cash for her business as possible and doesn’t end up with a tax bill as a result.
Edit - iher practice is a private limited company and she is the (sole) director.
I’m due some compensation to finally arrive in the next few weeks, after a long battle over liability and agreeing a settlement figure. I would like to put some of that cash (£25-30k) into my partner’s business. She’s a vet with a small, specialist practice and to be honest, even £25-30k won’t go far with the price of diagnostic imaging or other veterinary equipment.
I’m aware that if I just give her the cash, there will be tax liabilities, so what is the best way to (legally, obviously) minimise any tax due/invest in her business? She did a lot of looking after me and my dog while I was incapacitated, but didn’t charge me a penny for any of her time. She has easily lost the amount I’m suggesting by not working for the hours she was looking after me/my dog since 2017.
I obviously don’t want to do anything illegal, but I do want to make sure she gets as much of the cash for her business as possible and doesn’t end up with a tax bill as a result.
Edit - iher practice is a private limited company and she is the (sole) director.
Edited by Dibble on Thursday 1st December 08:12
Dibble said:
I’m aware that if I just give her the cash, there will be tax liabilities, so what is the best way to (legally, obviously) minimise any tax due/invest in her business?
In U.K. common misconception that gifting to people is taxable to them, it isn’t.Only time the gift allowance kicks in is if you die after giving the gift, it’s still assessed as being yours (on a reducing sliding scale) for inheritance tax purposes & would be taxed on that basis only if you exceed the inheritance tax threshold.
If she already has an established business, ask her accountant how best to introduce more capital & they will draw up the required paperwork to reflect how you wish it to be shown
As has been mentioned, gifting money (or any other asset for that matter) to an individual is NOT a taxable matter UNLESS the person making the gift dies within seven years of making the gift. Even then, all that happens then is that the value of the gift is added back to the value of the person's estate at the time of death so it gets included in the (possible) Inheritance Tax calculation.
If the person giving the gift is married to (or a civil partner of) the recipient of the gift, then there is no Inheritance Tax arising at all. Gifts between spouses are ignored for Inheritance Tax purposes.
Your partner is running a business which she operates through a limited company. You have two choices, you can gift her the money personally which she can then put into her company as she sees fit. Or you can gift the money directly to her company.
I'd go with the first choice and let her decide how much and when she wants to put the money into her company's bank account.
If the person giving the gift is married to (or a civil partner of) the recipient of the gift, then there is no Inheritance Tax arising at all. Gifts between spouses are ignored for Inheritance Tax purposes.
Your partner is running a business which she operates through a limited company. You have two choices, you can gift her the money personally which she can then put into her company as she sees fit. Or you can gift the money directly to her company.
I'd go with the first choice and let her decide how much and when she wants to put the money into her company's bank account.
Eric Mc said:
As has been mentioned, gifting money (or any other asset for that matter) to an individual is NOT a taxable matter UNLESS the person making the gift dies within seven years of making the gift.
General thought - with the recent demolition of Dividend and CGT allowances I wonder if Gifting will be allowed to continue as is. It seems remarkably generous given the tax environment we live in.And if I were to do some work for somebody, say £1,000, and it was liable for income tax, what is to stop them gifting it to me instead?
hotchy said:
Does she actually want the money in the business? Surely, it would make more financial sense to lease the expensive equipment to then put it against her tax bill?
Then spend the money on something you'll both enjoy. Holiday/car/kitchen/a ring....
She has easily lost that amount of money by helping me. It looks like gifting it directly to her is the best option, then she can investigate rental vs purchase and decide what’s best with her accountant. She is the least avaricious person I know and isn’t interested in “stuff”. She could earn a ton of money as a vet, but she does a lot of work for animal charities and charges very little, because to her, looking after animals is the right thing to do and being a vet is a real vocation for her. She could easily charge more, but she would rather animals get treated than people not be able to afford a vet bill.Then spend the money on something you'll both enjoy. Holiday/car/kitchen/a ring....
I’ll still have some cash left over, which will cover the holidays etc! And there is no ring on the horizon. We’ve been together almost 8 years and neither of us want to get married, we are happy with the way things are.
Simpo Two said:
General thought - with the recent demolition of Dividend and CGT allowances I wonder if Gifting will be allowed to continue as is. It seems remarkably generous given the tax environment we live in.
And if I were to do some work for somebody, say £1,000, and it was liable for income tax, what is to stop them gifting it to me instead?
Nothing to stop you gifting the money but you are still liable to UK Income Tax on the income before you decide to give it away.And if I were to do some work for somebody, say £1,000, and it was liable for income tax, what is to stop them gifting it to me instead?
Dibble said:
She has easily lost that amount of money by helping me. It looks like gifting it directly to her is the best option, then she can investigate rental vs purchase and decide what’s best with her accountant. She is the least avaricious person I know and isn’t interested in “stuff”. She could earn a ton of money as a vet, but she does a lot of work for animal charities and charges very little, because to her, looking after animals is the right thing to do and being a vet is a real vocation for her. She could easily charge more, but she would rather animals get treated than people not be able to afford a vet bill.
I’ll still have some cash left over, which will cover the holidays etc! And there is no ring on the horizon. We’ve been together almost 8 years and neither of us want to get married, we are happy with the way things are.
Be aware of the (still) substantial advantages nmarriage (and civil partnership) confers on couples. Many people have received massive and unexpected Inheritance Tax (IHT) bills because, following the death of their partner, they discovered they had no exemptions from IHT.I’ll still have some cash left over, which will cover the holidays etc! And there is no ring on the horizon. We’ve been together almost 8 years and neither of us want to get married, we are happy with the way things are.
Eric Mc said:
Be aware of the (still) substantial advantages nmarriage (and civil partnership) confers on couples. Many people have received massive and unexpected Inheritance Tax (IHT) bills because, following the death of their partner, they discovered they had no exemptions from IHT.
A good point, thanks. We don’t live together and the value of my estate isn’t huge, so even if there is IHT to pay, she will get something. I might have to spend a few quid on a decent accountant to look at the options and redraft my will. lizardbrain said:
I gave an unsolicited money gift to an company once as a token, and I think in the end it caused them more pain than joy, due to some complexity with their accounting
Personal or cash is the way to go I think!
Limited companies have obligations to make disclosures in their accounts regarding such things as significant donations from individuals. Companies House and to some extent HMRC wasnt to know what individuals might be exerting influence over the conduct of the company. This includes people who are not directors, employees, shareholders or spouses or relatives of the these categories of persons.Personal or cash is the way to go I think!
Dibble said:
Eric Mc said:
Be aware of the (still) substantial advantages nmarriage (and civil partnership) confers on couples. Many people have received massive and unexpected Inheritance Tax (IHT) bills because, following the death of their partner, they discovered they had no exemptions from IHT.
A good point, thanks. We don’t live together and the value of my estate isn’t huge, so even if there is IHT to pay, she will get something. I might have to spend a few quid on a decent accountant to look at the options and redraft my will. Panamax said:
Why get into the gifting thing at all? You can just make it an "interest free loan repayable on demand" and keep all options open. Has exactly the same benefit to the business.
It might sound stupid, but I don’t want to have some sort of “hold” over her, if that makes sense? I know (and she would too) I’ve no intention of ever asking o be repaid, whatever might happen in future, but a loan (however long term) wouldn’t feel the same as giving her the cash, with no strings attached, however tenuous those strings might be. No matter how much I give her, I couldn’t ever repay how good she has been to me, especially after the accident and how much she helped me (and continues to). She works 80 plus hours a week and never charges the charities she provides vet care for even the lowest going rate for the hours she puts in. I’ve never met anyone as driven, focussed and passionate about what they do in life.
She is one of about three people my idiot dog likes (actually, he adores her). He is very ill at the moment and she has been treating him at least twice a day, will not charge me for her time and only charges the absolute minimum markup for the drugs she’s prescribed (it causes less hassle with the various regulatory bodies to charge for drugs, rather than supply at cost price - it’s one of those odd quirks in her profession).
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