Self-Assessment - commission payment query

[Mully79]

Really sorry if I sound thick here! I'm going to fill in my self assessment online over the next week or so, but I have a query (my business was only registered in August so I'm a newbie to all this).

I draw portraits, and I put some leaflets in my daughter's nursery. We came to an agreement that any sales generated through her nursery, I would give a 10% cut of earnings to them.

It was an agreement made with the manager, not the owners, and was a verbal agreement, basically a way of raising cash for new toys / equipment or to reward the staff, and not as a means to line the owner's pockets!

Can this be classed as a deduction? It's not a charitable donation, more like a commission or 'gift' paid to the nursery? Would it be classed as an expense, in that case which category does it fall under? My invoices / receipts for the portraits all state the full amount, not minus the 10% so I am currently in effect showing it as income when of course it won't be.

I've not yet given the money (only about �50) to the nursery as I don't know what to do about it, and I assume I should ask for a receipt for the money given to them, but what to class it as?

[Skyline D]

It's a commission expense, a "Cost of sale" if you like. It's perfectly allowable for tax purposes from your point of view.

So yes it's allowed as a deduction for tax purposes in your return, Not sure what else it is you are actually asking?

For the nursery incidentally it would be taxable income. If they buy toys with it then those toys would be allowable as expenses for them and offset it. As would payments out to staff though then of course they'd be taxable for the members of staff receiving them.

[madmaggot]

The only thing I would add to skyline's answer is to be sure to document these payments. Don't just hand over an amount of cash, make sure it's visible though your business current account and keep a seperate record of the income related to this agreement cross recorded to the payment.