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Police in the UK have offered a reward for information leading to the arrest of a suspect in a double murder:

Police hunting a man suspected of murdering his ex-partner and her mother believe he is being "protected".

West Midlands Police said a £5,000 reward was being offered for information leading to his arrest.

(BBC News, emphasis mine)

If someone was to provide information and claim the 5,000 GBP, would that be liable for tax? If so, as what- income, 'self-employment'? I'm not sure about the situation in other nations, but it seems as though it would be reportable to the IRS in the US, for example.

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    I'd be interested in hearing if other countries are different; or even if different agencies are treated differently- if it's offered by a police force / privately / etc.
    – bertieb
    Aug 29, 2018 at 21:45

1 Answer 1

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You will have to pay tax, but only if you are a private detective who actively worked on the case.

Non-taxable income

Not all income is subject to taxation, here's a fairly comprehensive list and you'll notice that your national lottery winnings are not taxable.

Exercising your profession or vocation

Whilst police rewards are not mentioned there, you may wish to read, for instance, the Authors and literary profits: awards and bursaries section in HMRC's internal manual. From it:

If it comes to the individual as an incident in the exercise of his or her profession or vocation... it should normally be treated as a professional receipt and included in the computation of the taxable profits.

So so long the prize was not part of 'exercising your profession or vocation' - no tax it seems.

Gifts

Whilst referring to employment the section on Employment income: gifts not taxable as earnings states:

A gift does not count as earnings within section 62 if it’s made:

  • on personal grounds (for example, a wedding present)

  • as a mark of personal esteem or appreciation

The second bullet may be relevant here.

So it all seems to be pointing in the direction of - no, you won't pay tax for such prize money.

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    Nice first answer. Can I ask: is there any particular reason you explicitly mention National Lottery winnings?
    – TripeHound
    Aug 30, 2018 at 7:07
  • @TripeHound same reason every lottery advert says the prizes are non-taxable.
    – Ulkoma
    Aug 30, 2018 at 7:30
  • @Ulkoma Yes, but lottery adverts are about... the lottery. This question isn't. Just seemed an odd thing to mention.
    – TripeHound
    Aug 30, 2018 at 7:33
  • @TripeHound it does not seem odd to me, the adverts makers know how greedy humans are, a person wind the jackpot and the first thing he asks do I have to pay tax for it? So it became a common thing to mention the lottery every time people discuss non-taxable income, that's just my theory
    – Ulkoma
    Aug 30, 2018 at 7:39
  • There's a bit more underneath though that I'd suggest raises doubt: "Gifts that are not cash and don’t have a money’s worth value (EIM00530), are not earnings taxable under section 62. But they may be taxable under the benefits code (EIM20006), as may cash gifts and gifts that have money’s worth value, not taxable as earnings (EIM21006)."
    – Philbo
    Aug 30, 2018 at 13:09

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