Tax implications for prize money

Hello,

A company would like to give out several different amounts of "prize money" to several ramdom persons during the year for taking part in competitions.

What are the tax implications for this?

Ideally the company would like to issue the prizes/monies "tax-free".

In that case I’m guessing the company would need to pay that complete possible amount of tax on them before giving them out?

Can someone answer this for me?

anyone?

Are the amounts of money involved substantial? What is your relationship to the recipients?

Is my understanding below correct?

A company whose main activity is selling goods or services wants to run competions with cash prizes as a form of advertising and promotion?

And you want to know what the tax implications of this are for A)the company and B) the prize winner.


If this is the case the company needs to understand what the objectives of the promotion are:

What are the costs associated with the promotion?
How do you measure the effectiveness of the promotion?
Is the company in a postion to meet its commitments? A few years ago Hoover ran an open ended promotion involving flights to the US - it effectively broke the company.