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Where Taxpayers and Advisers Meet

Trading Income Allowance and non-exec director

Brightonian
Posts: 99
Joined: Wed Aug 06, 2008 3:31 pm

Trading Income Allowance and non-exec director

Postby Brightonian » Mon Jun 11, 2018 10:44 am

I have a client who is a non-exec director. He is paid a small amount each year - for 17/18, it was three payments of £200, so £600 for the year. I have previously pointed out that he is an office-holder and that these amounts should, in my opinion, be taxed under PAYE, but the organisation disagrees. I have always shown them as additional income, rather than self-employment and so he has never been able to claim expenses - but these would be minimal anyway.

Following the introduction of the new trading income allowance, I asked him to go back again to the organisation for the precise status of the fees. They say that they are consultancy fees and as such a source of self-employment, and they are backed up by the audit partner at the firm they use. As they are so adamant, I am tempted to claim the new allowance against them. But I have a nagging suspicion that they are not a self-employed source. Also the allowance cannot be claimed where the payment is made by an employer - does the same apply where the taxpayer is an office-holder but has a separate source of fees from the same organisation?

bd6759
Posts: 3106
Joined: Sat Feb 01, 2014 3:26 pm

Re: Trading Income Allowance and non-exec director

Postby bd6759 » Mon Jun 11, 2018 6:52 pm

The default position is that a directorship is an office.

Without any further information about what he does and why he gets paid, seemingly without invoicing for it, no one can gove a definitive answer. I would stick with what you have been doing. The trading allowance cannot apply because there is no evidence of a trade.

Brightonian
Posts: 99
Joined: Wed Aug 06, 2008 3:31 pm

Re: Trading Income Allowance and non-exec director

Postby Brightonian » Tue Jun 12, 2018 9:15 am

Thank you for taking the time to respond. On your final point, however, it seems from the tax return notes that 'miscellaneous income from casual earnings, commission or freelance income' can be covered by the trading income allowance.

robbob
Posts: 2827
Joined: Wed Aug 06, 2008 4:01 pm

Re: Trading Income Allowance and non-exec director

Postby robbob » Tue Jun 12, 2018 9:41 am

The trading allowance cannot apply because there is no evidence of a trade.

Interestingly looking at HS325 hmrc advise as follows

From 6 April 2017 receipts from self-employment
and miscellaneous income of £1,000
or less are exempt from tax and don’t need to be reported on a tax return.

So it appears that an allowance can be available (different name?) with regard to some misc income


https://www.gov.uk/government/publications/other-taxable-income-hs325-self-assessment-helpsheet/hs325-other-taxable-income-2018
https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income#trade

So without knowing the answer it would seem to me there may be a possibility that the allowance could be claimed if this is deemed to be casual type earnings - Note the second link has details of situations where the allowance cannot be claimed even if a claim could normally be made - eg if the individual is connected to the controlling parties of the company.

I imagine hmrc would be able to confirm in writing what their viewpoint is.

Brightonian
Posts: 99
Joined: Wed Aug 06, 2008 3:31 pm

Re: Trading Income Allowance and non-exec director

Postby Brightonian » Tue Jun 12, 2018 9:47 am

Robbob,
Thank you very much for your comprehensive reply. Every year we seem to have some new provision or allowance which looks simple on the face of it but throws up miscellaneous problems in practice!


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