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Nicola-mod, Moderator
Category: Tax
Satisfied Customers: 21
Experience:  Moderator
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Now that I am retired my tax affairs are quite simple- I am

Customer Question

Now that I am retired my tax affairs are quite simple- I am not drawing a pension (yet) and have not quite reached 65 for a government pension payment so my tax return is very straight forward. However I am looking for one -off tax advice for one element of my financial situation.

A company that I started with a team of other investors in 2002 was sold in 2010 for a share swap with shares of the acquiring company and an 'earn out' bonus. Essentially, if the new owners sold 'x' amount of product in the 30 months following acquisition the original owners would get a bonus, '£y', to be shared out by the original owners based on their proportional holding at the time of acquisition.

That bonus deadline has just passed and I have been presented with a cheque for around £25,000 as a consequence. The money falls into the 2013/1014 tax year so I have plenty of time to plan what I need to provide for but I need to know how this money is treated for tax purposes- is it deemed income or is it part of a capital gain linked with the original company sale.
Submitted: 4 years ago.
Category: Tax
Expert:  Nicola-mod replied 4 years ago.

I've been working hard to find a Professional to assist you with your question, but sometimes finding the right Professional can take a little longer than expected.

I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.

Thank you!
Expert:  TaxRobin replied 4 years ago.
Hello and thank you for your patience,
Your question is not the usual asked.
The bonus payout would not be capital gain. Capital Gains Tax is a tax on the profit or gain you make when you sell or ‘dispose of’ an asset. The bonus payment to you was not any thing more than a bonus payment but not in the form of any action upon your part. The sale of your portion of the business ended and this additional amount paid to you is not capital in nature.
Profits arising from operations which cannot definitely be regarded as amounting to a trade within ICTA88/S832 (1) or ITA/S989 are miscellaneous income.
Again thank you for your patience.
Expert:  Nicola-mod replied 4 years ago.

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Thank you,