Tax on cash gifts

R

rocky76

Guest
I received 2 cash gifts last year while on placement during a training programme. These gifts were from the business where I was on placement but my salary was being paid by the HSE.

The business who gave me these gifts has now called me and has requested that I pay tax on these 2 sums of money. Does anyone think that I am required to pay tax on these 2 gifts. I'm now in a full time PAYE job elsewhere having completed my training.
 
Hi

Were the "gifts" related to your employment with the business. If so then they probably should have been subject to PAYE.
 
Thanks for your replies. On both occasions these payments were by cheque, one in an Xmas card and the second in a thank you card when I was leaving.

As my salary was not being paid by the same people I thought that these 2 cash gifts may fall under the 3000 euro yearly allowance for gifts that would be tax exempt?
 
rocky76 said:
Thanks for your replies. On both occasions these payments were by cheque, one in an Xmas card and the second in a thank you card when I was leaving.

As my salary was not being paid by the same people I thought that these 2 cash gifts may fall under the 3000 euro yearly allowance for gifts that would be tax exempt?
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The problem is that they aren't really a gift though.

It sounds as if they may have been told by their own auditor that the amount was liable to tax, as you were working for them.

I'll put it to you this way - say you know a carpenter, an electrician and a plasterer. And you are building a little conservatory onto your house. And you buy the materials, and the lads supply their labour to you for free because your such a nice guy. And you're so grateful that you give them each a gift of how much they might have charged you for their few days labour... Seeing any problems with this scenario?!

To extend it - What if they were such nice and popular guys, with lots of friends like you, and they work for free all year round, getting lots of "gifts", and only ever paying the low rate of gift tax, rather than higher rate income tax...! Obviously, that just isn't going to fly, as the facts argue against the purported explanation.

OK so my example is a little extreme, but your situation isn't really any different than this ultimately; you were working in their organisation - I would ask the question, if you hadn't been working for them would they still have given you these cheques? Of course not, and therefore the money was given to you in appreciation of work done for them. It's no different than them paying a bonus to a regular employee on their payroll, and that is always subject to tax.

But, the good news is, as an employee, you aren't responsible for discharging the tax; as the employer in this scenario the responsibility for operating PAYE rests with them. And strictly speaking they should have emergency taxed it, if you weren't actually on their payroll. So if they are concerned about dotting the i's and crossing the t's here, they may need to hand over to Revenue an amount of tax equal to 80%-90% of what they paid you, and if anything, you'd then be due a refund!

If you wanna annoy them, suggest that to them and see what they say - ask them to pay the PAYE, PRSI, Income Levy on the grossed up amount of the payments they made to you, and then to issue you with a P60/P45 (it sounds like these payments straddled 2 tax years). There's a good chance they'll just go away then! :D
 
Employer is totally at fault here. Its there responsibilty to include any BIK in the payroll - they need to amend it and pay the additional tax over to Revenue. This has nothing to do with you.
 
Thanks again for all advice.

PAddy199-Would you have any advice as to what my response should be to the person looking for me to repay this tax to them, they are expecting me to reply and agree a timeframe for me to reimburse them for the tax that wasn't paid at the time. I have a feeling that if I respond to them and they see that I'm clued in to the situation they will back off.
 
rocky76 said:
Thanks again for all advice.

PAddy199-Would you have any advice as to what my response should be to the person looking for me to repay this tax to them, they are expecting me to reply and agree a timeframe for me to reimburse them for the tax that wasn't paid at the time. I have a feeling that if I respond to them and they see that I'm clued in to the situation they will back off.
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Ahhhhh, well that's kinda different then. I'd say they might well be entitled to correct an error, if they hold their hands up and say that they forgot to deduct the tax / PRSI, and that they need you to reimburse it to them - this could happen in an ongoing employment, but it's a bit awkward given that they aren't your employer any more.

I can get you a definitive answer on this Rocky, but it might take me til tomorrow evening...
 
Thanks, just to reiterate they were not formally my "employer", i.e. they were not paying my salary. I was on placement within their company. It was the HSE who were my official employer and paying my salary.
 
They haven't a leg to stand on as far as I can ascertain. If you want to, you can agree to do as they ask.

Alternatively, you can point out to them that you are entitled as a PAYE employee to presume that any amounts paid to you are net of tax, levies and social insurance. The onus under tax legislation is on the employer to make deductions and remit these to Revenue.

But in either case you should also state that if the money is taxable as income you expect to receive a P60 and/or P45.
 
Hi Rocky

If there is even a slight possibility that you might find yourself sometime in the future either wanting to work for this company, doing business with them in some capacity, or indeed with another company known to them, or merely looking for a reference from them, I would suggest that you should think very, very carefully before walking yourself into a dispute with them over the tax arising on this money.

From what you said, the company who paid you these sums did so as a gesture of goodwill. You may technically be within your rights to insist that they face up to the tax responsibilites arising from these payments, but on the other hand, you might be better off in the long term to co-operate with them in sorting this out.

Anyway, unless the sums involved were large, its unlikely that the tax bills arising are that big - or am I missing something?
 
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