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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3817
Experience:  FCCA FCMA CGMA ACIS
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I had a business with someone. The business is closed, money

Resolved Question:

i had a business with someone. The business is closed, money has been taken out and all taxes have been paid on that money. i have agreed with someone who was in the business they will give me some of the money to settle varying things. They have already fully paid tax on it. is this classified as a gift from them to me so there is no tax to pay by me on the money when they give it to me? Thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

No, it is not in my opinion a gift, merely the settlement of inter personal private debts and thus outside the scope of UK taxation. Of course, if interest, is paid then this interest is income in the hands of the recipient and must be declared.

I do hope that I have been able to set your mind at rest on this matter.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
OK, so they are simply repaying a debt to me. Tax has already been paid on the money in terms of CT and personal tax for taking the money out of the company. They are using personal money to repay what they owe. On that basis no tax due. I looked on the SA form and could see no where i could put, i don't believe there is. So no tax due. out of interest if someone simply gives someone some money, out of good faith to help them, i assume no tax due either? Only that inheritance tax may apply if they died within 7 years? Many thanks.
Expert:  bigduckontax replied 1 year ago.

You are correct, the repayment of such debts is outside the scope of UK taxation and does not and indeed should not be declared.

The UK has no gifts tax regime so any gift is tax free in your hands. The matter of the Potentially Exempt Transfer (PET) and its effects on Inheritance Tax (IHT), the seven year taper, you seem to have grasped. There is an outside chance that you could be liable for IHT on a PET were the donor to die and have insufficient funds to meet their IHT bills.

Thank you for your support.

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