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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Specific receipts: voluntary receipts: others

Such payments arise in a wide variety of circumstances. It is not possible to set out ‘rules’ that will cover all instances and, in cases of doubt or difficulty, advice should be sought from CTISA (Technical). But case law does give us a number of ‘signposts’ namely:

  • voluntary payments or gifts, are not taxable unless they can be attached to a pre-existing source such as a vocation (Beynon v Thorpe [1928] 14TC1 at page 13);
  • the existence of a trading relationship between payer and recipient is not necessary in order to stamp a payment as a ‘trading receipt’ (CIR v Falkirk Ice Rink Ltd [1975] 51TC42 at 52B);
  • it is the character of the payment in the recipient’s hands that determines whether it is taxable, but the payer’s purpose in making the payment may be evidence of that character (Chibbett v Joseph Robinson & Sons [1924] 9TC48; Murray v Goodhews [1977] 52TC86 at 108H to 109C and 111E/F; Rolfe v Nagel [1981] 55TC585);
  • if the character in the recipient’s hands is that of a payment made in order that the money may be used in the recipient’s business, to supplement trading or other business receipts and to enable the recipient to carry on business, or otherwise to preserve and maintain trading stability and solvency, then it will be a taxable trading receipt (Smart v Lincolnshire Sugar Co Ltd [1937] 20TC643 at 670; British Commonwealth International Newsfilm Agency Ltd v Mahany [1962] 40TC550 at 578 and 582);
  • it will also be a taxable trading receipt if it is recompense for services etc provided that have not otherwise been adequately remunerated, or to make good a loss of profit (Rolfe v Nagel [1981] 55TC585).

Where a trader receives what is termed a gift from a close relative (that is forebears, offspring, brothers and sisters) it may normally be accepted that the sum comes to the trader not in that capacity but by virtue of the close personal relationship.

Voluntary payments designed in some way to augment the consideration payable for goods or services whether past, present or future, are taxable (see, for example, Severne v Dadswell [1954] 35TC649, and CIR v Falkirk Ice Rink Ltd [1975] 51TC42.