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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5113
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hi, I have received a substantial sum of money from my ex boss

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Hi, I have received a substantial sum of money from my ex boss and I am unsure whether I need to pay tax on this or not. I have not worked for this employer since October last year but I don't know if the gift would be considered earnings?
Hello and welcome to the site. Thank you for your question.

Please expand on your question ...

-When you left your employment, were there any outstanding financial issues between you and your employer that were not resolved at the time of leaving employment?

- Is the substantial sum from an individual or employer?

- Is anything expected of you in return?

Many thanks
Customer: replied 3 years ago.
I did not leave his employment, he sold the company to a bigger company and since October I have worked for them. There were no outstanding financial issues. Nothing is expected of me in return and he is under no obligation to give me the money. The cheque is sent from an individual through his solicitor.
Thank you for your reply and for additional iformation.

The substantial amount given to you appears to be a gift, prima facie.
You have no tax obligations on this as the recipient of a gift receives it free of tax. You don't have to report it on your tax return.
I recommend you to keep a copy of the cheque and any correspondence with it in th event HMRC were to make an enquiry at a future date.

As far as the giver of gift is concerned, it would be deemed a potentially exempt transfer for his/her inheritance tax purposes and the seven year rule would apply on this amount i.e.If he/she survives for 7 years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter what the value.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond. and other Tax Specialists are ready to help you
I thank you for accepting my answer.

Best wishes.