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Voluntary payment

01 July 2014
Issue: 4458 / Categories: Forum & Feedback , Business , VAT

The taxation of a builder’s gratuitous payments from satisfied customers

Our client is a first-class builder and we have acted for him about 15 years. We have no reason to doubt his integrity so were not surprised by his query which concerns the tax position of amounts received gratuitously from clients.

His work often comes by word-of-mouth recommendation or he is engaged by an existing wealthy client to extend or refurbish another property they own.

To our knowledge there is no formal contract other than a quotation for labour and materials for each assignment which is subsequently invoiced. At times we understand that clients would pay a significant bonus and until now and unbeknown to us our client has accounted for the receipt as income in his accounts and has paid VAT on it.

Recently on a very difficult job the builder’s client was so pleased with the work that they added an...

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