Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.
The fact you call it a gift, and you are worried that you failed to treat it as a taxable payment and deduct the appropriate tax and National Insurance from it I assume is the issue here? In case this comes back to bite you, and you are asking for explanations to avoid the tax man turning his attentions on you?
Is this right?
Hi Sam. Yes I didn't deduct NI or PAYE from it. I just gave her a cash bonus to avoid it getting taxed. She is wondering if we could say it was a personal loan instead? yes I am just not sure what she should tell the taxman.
P.s. she is like a mother to me. She has been with me many years and we have a close friendship as well as business relationship. I only mention this because we both want there to be a suitable outcome and she will protect us as much as we will protect her, but I just don't know what to recommend she does, as to how she explains where this money came from...
thanks for your advice, Tim
Thanks for your response
I am sure that it will come as no surprise to you, that I advise for her husband on her behalf to be honest with the tax man, - as to be perfectly honest if its her husband that is being looked into, and this is a joint account then they will accept that it was a bonus paid to her and should have no reason to ask for paperwork to back this up.
If this was paid into her account (and it just has her name on the account) then it will have no bearing on her husband - unless of course there are lots of cash deposits that have occured into her account ....
The moment you start making up where money has come from, and there is no paper trail to back a position up then its only ever going to make the situation worse for them - which I am sure you wish to avoid at all costs
If you say this is a loan - then they will ask why a cash deposit - and will then ask for evidence of the loan arrangement -
My advise she should state that it was a bonus - and that you provide paperwork to back this up - and that you delare this as the gross amount (so for example approx £5000 gross less the appropriate deductions tax of tax and NI ) then you can
1) Claim this as a legitmate business expense
2) Its one less thing for them (and you) to fret over
Anything else I offer would see me not doing my job property which you must appreciate I cannot do.
Thanks loads for your advice.
So you think the best thing is for my employee to say it was a bonus and hence she will then have to declare it for tax (it was a couple of years ago).
You don't think the HMRC will look into us as a company then? I just don't want to also get investigated with all the hassle and cost that brings, I don't want the tax man to ask us, where did we get the cash from.
Thanks a lot, tim
You advise its her husband being investigated, so they will not action this payment position UNLESS it wa paid into a joint bank account.
I cannot guarentee that HMRC will not then look to you as a company - as clearly what has taken place isnt correct - but if this was paid into an account that was in her sole name, then there will be no come back, if its was paid into a joint account and she advsies this was just a bonus and HMRC accept this - and she has the paperwork to back this up - and you rectify the position with the tax and NI (so that the payment she would have been left with was £3500) then everyone can sleep better at night - I am sure you will agree!
Yep - great thank you very much for your advice.
And for getting back to me on a sunday
very best wishes to you,
You are very welcome and I wish I could offer
me way around this, but I am sure that you can appreciate we have to try and steer you in the appropriate direction with tax matters! (Or we would not be doing our job properly)
It would be appreciated if you could rate the level of service I have provided, as this ensures I am credited for my time.
Let me kn ow of course if you have any follow up questions on this matter.