Referral Fee received. Now what?

[TheCyclingProgrammer]

So since the payment is income it would be more tax efficient for the money to be paid to the company (which pays CT then a dividend) rather than the director receiving it directly (pays income tax/NI via self assessment).

There shouldn't be any additional NIC to pay if its just declared as additional income, so corp. vs personal income tax depends on OPs marginal rate. If they are a basic rate payer then its the same either way.

The VAT issue does complicate things though so personally I'd be inclined to pay tax on it personally. Its effectively money for nothing anyway!

[TheCyclingProgrammer]

Your example does not involve income or a capital gain, in my opinion. Rather, it's a gift. For a referral fee OTOH, that would be taxable as income.

Hmm perhaps, but OP hasn't really done any work for the money have they and its not exactly income from trading either.

I don't know what the answer is and I suppose the prudent thing to do would be to err on the side of caution and declare it *or* ring HMRC and ask for their opinion on whether it constitutes income.

[d000hg]

I can't see someone mistakenly paying money into the wrong account has a major impact, such errors happen all the time. If you can get it documented this is a payment to you personally I'd just take it out. There's a clear paper trail if you are audited but if you are above board with your SATR this just seems like common sense applies to me.

Whether it's advantageous to do it this way rather than count it as company income though...?

[jamesbrown]

Hmm perhaps, but OP hasn't really done any work for the money have they and its not exactly income from trading either.

I don't know what the answer is and I suppose the prudent thing to do would be to err on the side of caution and declare it *or* ring HMRC and ask for their opinion on whether it constitutes income.

IMHO, I don't think the substance or extent of what the OP has done matters too much, because it's remuneration for a service (an introduction), as opposed to a gift, for example. It's not dissimilar from an agent receiving a fee for an introduction, only that would constitute business income for the agent.

[TheFaQQer]

I got a £100 bonus when I opened my personal First Direct current account. Should I have declared that as income? Isn't this largely the same thing?

One is a gift, the other is a payment for a service performed, so the taxation is something very different.

[TheCyclingProgrammer]

IMHO, I don't think the substance or extent of what the OP has done matters too much, because it's remuneration for a service (an introduction), as opposed to a gift, for example. It's not dissimilar from an agent receiving a fee for an introduction, only that would constitute business income for the agent.

OK, you've convinced me.

[TheCyclingProgrammer]

I can't see someone mistakenly paying money into the wrong account has a major impact, such errors happen all the time. If you can get it documented this is a payment to you personally I'd just take it out. There's a clear paper trail if you are audited but if you are above board with your SATR this just seems like common sense applies to me.

Should probably still show it in the company books as a credit/debit to the director's loan account IMO, just to make it clear.

[rd409]

Should you not have received a pre-paid gift card? In my knowledge most of the agencies pay out either some sort of gadget(s) or gift cards to avoid this scenario.

[I just need to test it]

My accountant has spoken. Expletives removed.

If the recommendation was given while working on the contract through the limited company rather than a personal assignment outside the company, the referral fee will be payable to the company and the company pay corporate tax on the income due to this being added to the company profit.

[TheCyclingProgrammer]

My accountant has spoken. Expletives removed.

If the recommendation was given while working on the contract through the limited company rather than a personal assignment outside the company, the referral fee will be payable to the company and the company pay corporate tax on the income due to this being added to the company profit.

Probably not a big deal really as it means you only pay the equivalent of basic rate tax without actually using up some of your basic rate band.

Did your accountant advise on how to treat it for VAT? If its company income, then you're probably going to have to either a) Get the agency to cough up VAT on top (in theory they should be fine with this as they can reclaim the VAT anyway but wouldn't be surprised if they don't agree) or b) treat the total amount as VAT inclusive and hand over the appropriate amount to the VAT man. You'll need to raise a valid VAT invoice too.