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I take dance lessons with one other person: we share the teacher's time 50:50 and pay half the cost each. Currently, my partner pays this money into my bank account and then I pay the teacher. However, I worry that the tax authority will see this as income for me & demand income tax on it, even though I see it as simply channelling their money to their expense, and not actually income for me.

Of course, I could come to an arrangement where we pay the teacher 50:50 and the money never goes through my account, but the teacher doesn't like this.

Is there another way? For example, is there some specific way to declare split-bills on a tax form and avoid it being called income?

niemiro
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    how much are you paying that you think this is going to be noticed by people dealing with millions? – Aequitas Sep 14 '22 at 06:59
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    Just because it comes into your bank account, doesn't mean it was income for tax purposes. There are lots of reasons for people to move money around from their own accounts, or receive money non-taxable (tax rebates, in this case a split bill, etc). – stanri Sep 14 '22 at 08:02
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    This is commonplace in the UK. You really have nothing to worry about... HMRC also doesn't just routinely peer into random people's bank accounts – ScottishTapWater Sep 15 '22 at 13:44

2 Answers2

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There's no need to do anything. You don't need to declare it on any tax form, and if you are ever audited by the tax authority (HMRC), just explain what happened. Repayment of a debt/sharing an expense like this is not income.

GS - Apologise to Monica
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    I would note that some online payment providers take the liberty of doing (wrong) tax reporting of their own, although the cases I've heard of this causing problems for people are using Paypal in the US with the automatic form 1099. Direct bank transfer in the UK seems safe. – pjc50 Sep 13 '22 at 10:08
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    @pjc50 That would be a serious breach of GDPR if they did .... – deep64blue Sep 13 '22 at 10:46
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    +1 - anecdotally I did this for years with rent, where I paid the letting agent and my housemates paid me. It never occurred to me to think about tax issues and was never a problem (I was however solely responsible for paying the full rent which in retrospect may have not been very smart). – Carl Sep 13 '22 at 11:32
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    So I went and checked for the UK: it seems HMRC do have access to papal. Guardian https://www.theguardian.com/small-business-network/2017/jan/27/small-business-etsy-ebay-hmrc-tax-return-self-assessment and I think this bit of legislation; https://www.legislation.gov.uk/ukpga/2016/24/section/176/enacted – pjc50 Sep 13 '22 at 20:11
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    @Carl: "I was however solely responsible for paying the full rent" — in the UK, if you rent via a Joint Tenancy (which was pretty common when I was flatsharing), every tenant can be held legally liable for the full rent anyway. – Paul D. Waite Sep 14 '22 at 12:24
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    @PaulD.Waite Good point. My original co-tenants had long gone and been replaced by new ones. I don't remember if the first batch gave formal notice to the agent that they were leaving so maybe they were still liable. In retrospect it was a bit of a mess but no harm came of it and there were no tax implications. – Carl Sep 14 '22 at 13:09
  • @26460 if you're referring to my answer rather than some other comment, it's hard to provide a source for a negative, other than my own personal experience of having lived in the UK for a long time and having a good understanding of how the tax system works. – GS - Apologise to Monica Sep 15 '22 at 20:49
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It sounds like you are repeatedly paying, for each lesson taken. In that case, you could take turns paying the bill, so that you pay one bill in full and your partner pays the next bill in full.

This way the teacher gets a single payment each time, and no money is channeled.

user985366
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  • Probably still more work for the teacher to track payments coming from two different bank account numbers. – bdsl Sep 14 '22 at 11:23
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    @bdsl Where I live you cannot see which account a payment is coming from, I've never heard of that so couldn't imagine it being an issue. I see the UK tag now though, and I don't know how it works there. – user985366 Sep 14 '22 at 15:10
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    You can see the payer's account name when you receive a bank transfer here. – bdsl Sep 14 '22 at 15:58