Gifts from your income

[kloos]

Hi all,

My accountants sent me an end of year Tax Guide and it discussed gifting things like regular school fees and regular savings for under 18s. I pay both of these and wondered whether I can pay them through my Ltd company to offset against tax?

I tried asking my accountants and they couldn't help despite sending me the info in the first place!

Thanks.

[Fred Bloggs]

Hi all,

My accountants sent me an end of year Tax Guide and it discussed gifting things like regular school fees and regular savings for under 18s. I pay both of these and wondered whether I can pay them through my Ltd company to offset against tax?

I tried asking my accountants and they couldn't help despite sending me the info in the first place!

Thanks.

Remember, your income and your company's income are absolutely not the same thing.

[Lance]

Hi all,

My accountants sent me an end of year Tax Guide and it discussed gifting things like regular school fees and regular savings for under 18s. I pay both of these and wondered whether I can pay them through my Ltd company to offset against tax?

I tried asking my accountants and they couldn't help despite sending me the info in the first place!

Thanks.

a "gift" is from you to someone else. Not from your company to someone else.

A company can make a charitable donation, but that is different from a gift, and must not directly benefit you (paying for your kids school fees is considered a direct benefit to you so will be taxed as a BIK).

A regular saving for an under 18 would be basically theft from the company. Unless the child works for the company and at that point personal tax for the child kicks in. It would still not be a gift.

[northernladuk]

This is very basic stuff. You should know the difference between company money and your money by now. You should also know the very simple rule of thumb we have. To qualify it must be wholly and exclusively for the purpose of business. Apply that simple test first and see where you are.

Just the fact you are doing it purely to reduce your tax should be a good guide as to whether it will work. If it's pure tax avoidance then it's highly likely the answer is always no.

Lots of nuances here and there but with such a basic question it's not worth going in to any of them.

[kloos]

Thanks all, yes you are right, it is a fairly straightforward question which is why I was thrown slightly when my accountant said that they weren't able to answer it. Sometimes you can't see the wood for the trees when you start looking into this sort of thing, so thank you for your clarity of answers.

[malvolio]

Thanks all, yes you are right, it is a fairly straightforward question which is why I was thrown slightly when my accountant said that they weren't able to answer it. Sometimes you can't see the wood for the trees when you start looking into this sort of thing, so thank you for your clarity of answers.

Does your accountant assume he is only paid to answer YourCo's questions, not your personal ones, I wonder....

[Maslins]

I'm guessing maybe your accountant has paid a 3rd party to do the tax guide on their behalf, and they haven't taken the effort to read/understand it. Hence it may include clever stuff but the accountant might not understand it enough to elaborate further or tailor to your situation.

Hearing the phrase" gifts from your income" makes me think this is related to inheritance tax. Basically relevant to rich old codgers, thinking they might die soon, and want to gift all their stuff to their kids/grandkids before they pop it. They can't just give everything they've got, die the next day, and not suffer any inheritance tax on their estate. There's various ways they can legitimately get things out of their estate. One of the rules is basically if it's a gift from their income (not a gift from their capital) they can typically get away with giving more. Ie if they've got £10m quid, earning £50k interest/year, they can give away the £50k with less risk of tax consequences than giving away some/all of the £10m.

I don't think it's of any relevance to young/middle aged contractors who are still working via a Ltd Co.

[Fred Bloggs]

Does your accountant assume he is only paid to answer YourCo's questions, not your personal ones, I wonder....

Maybe. But, if the accountant prepares the annual self assessment, as is often the case. Then that's going to be a bit of a hindrance taking such a stance.

[kloos]

Yeah, normally these accountants are pretty spot on, so I'm going to put this down to them having a bad hair day. Interesting that you link it to inheritance tax as it was the section after that on the guide, so not something that is relevant to me.

[ladymuck]

Does your accountant do your SATR as well as company accounts? I wonder if they were issuing the tax guide for all their SATR customers not realising that some would mistake it for business tax advice?