Reply to: Referral Fee received. Now what?

[TheCyclingProgrammer]

Basically you need to make a written application for a small earnings exception which can be done if profit is less than 5 odd k a year.

My better half receives payment for providing care. The type of care provided is fully relieved and the income does not exceed the allowances. The only way to declare this is (or was it might have changed this year) through the self employment pages, so you have to register. This then triggers the class 4 flat rate charge.

This only applies if you're registered self employed though. You only need to register as self employed if you're trading. If you receive a one off piece of income such as in OPs case you can just put this in the additional income box. No exemption certificate required.

[ASB]

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!

I have recently discovered this is a right pain in the 'arris.

Basically you need to make a written application for a small earnings exception which can be done if profit is less than 5 odd k a year.

My better half receives payment for providing care. The type of care provided is fully relieved and the income does not exceed the allowances. The only way to declare this is (or was it might have changed this year) through the self employment pages, so you have to register. This then triggers the class 4 flat rate charge.

[TheCyclingProgrammer]

Not if it's not a loan from the company, but a mistake.

Event if its a mistake, its still a transaction into the company bank account which needs to be identified in the company books; double-entry bookkeeping says it has to have a matching account entry which in this case would be a credit to the DLA.

I once accidentally ordered a pizza on the company card when it should have gone on my personal card (obviously) - likewise I showed this as a debit from the DLA to show that I owed the company the money.

It might seem pedantic, but isn't that the point of double-entry bookkeeping?

[Sausage Surprise]

Say you won it on a TV quiz show...they aren't taxable either

[TheFaQQer]

Not if it's not a loan from the company, but a mistake.

You would show it as a credit to the DLA from the director, which can then be repaid by the company at any stage.

[speling bee]

Not if it's not a loan from the company, but a mistake.

It's a loan to the company (debt of the company to the director) that has come about by payment incorrectly into the Ltd's account. Possibly.

This is actually a really interesting question. I would speak to HMRC if my accountant couldn't advise.

What counts as taxable income?
Income from employment
Includes income from full, part-time and temporary employment.
If you get perks or benefits from your employer these may also be taxable.
Taxable company benefits - learn more
Income from self employment/partnerships
Profits you make from working for yourself as a sole trader or partner.
Pension income
State Pension.
Personal or company pensions.
Retirement annuity.
Interest on savings
Bank and building society interest - not including Individual Savings Accounts (ISAs)
National Savings and Investments accounts and bonds.
Investment income
Dividends on company shares - not including dividend income from ISAs.
State benefits
The most common taxable state benefits are:
Carer's Allowance
Jobseeker's Allowance
Employment and Support Allowance - 'contribution' based (if you have paid enough National Insurance contributions)
Incapacity Benefit - from week 29
Weekly Bereavement Allowance
Read the full list of taxable state benefits
Rental income
From a lodger in your only or family home if more than £4,250 a year (£2,125 if split jointly).
From a second property.
Other taxable income
Pensioner bonds.
Trust income.
What counts as non-taxable income?
State benefits
The most common non-taxable state benefits are:
Disability Living Allowance
Attendance Allowance
Lump sum Bereavement Payments
Pension Credit
Free TV licence for over 75s
Winter Fuel Payments and Christmas Bonus
Housing Benefit
Employment and Support Allowance - income based (if you haven't paid enough National Insurance contributions)
Income Support - certain payments
Child Benefit
Guardian's Allowance
Maternity Allowance
Industrial Injuries Benefit
Severe Disablement Allowance
War Widow's Pension
Young Person's Bridging Allowance
Read the full list of non-taxable state benefits
Interest on savings
All ISAs.
Savings Certificates.
Rents
First £4,250 a year from a lodger in your only or family home - £2,125 if split jointly.
Tax Credits
Working Tax Credit.
Child Tax Credit.
Premium Bonds
Wins from Premium Bonds are free from UK Income Tax and Capital Gains Tax.
If you have income that is not shown above
If you have income that is not shown above, please contact HM Revenue & Customs (HMRC) by following the link below.
Contact HMRC

[d000hg]

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.

Not if it's not a loan from the company, but a mistake.

[speling bee]

That's correct. Vat wasn't discussed as it was a payment from USA.

Pay it into a pension fund and then nobody will quibble. Probably.

[I just need to test it]

That's correct. Vat wasn't discussed as it was a payment from USA.

[borderreiver]

Did your accountant advise on how to treat it for VAT?

Would interest me as well. Didn't the OP state it was a payment in dollars? So possibly from an overseas client?

[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.

[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.

[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.

[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.

[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.