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RateSetter £100 bonus - tax treatment

Practical Issues
AleisterCrowley
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RateSetter £100 bonus - tax treatment

#150160

Postby AleisterCrowley » July 5th, 2018, 12:20 pm

Not sure if this is the best board, but anyway..

I opened a 'regular' ie non-ISA RateSetter account in Jan 17,and started receiving interest in May 17
I transferred to a RateSetter ISA 2 March 2018

So , all interest within 2017-2018 tax year
I also received a RateSetter "£100 cash back" payment of £100.53 on 23 Feb 2018 (the odd 53p is because they were late paying)

My tax statement from RateSetter shows the total interest only - the bonus is not included.

How is this bonus/cash back treated for tax purposes ?
Is it 'income' -in which case RateSetter have got it wrong, or is it a capital gain or similar?

I have asked them just now.

scrumpyjack
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Re: RateSetter £100 bonus - tax treatment

#150200

Postby scrumpyjack » July 5th, 2018, 1:33 pm

The third alternative is that it is in some way a rebate or discount on fees or management charges, past or future.

The courts ruled that Hargreaves Lansdown's Loyalty bonuses are not taxable for that reason.
https://www.moneymarketing.co.uk/hargre ... ax-battle/

I have received 'cashback' incentives from HL for transferring investments to them. These are not taxable.

PinkDalek
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Re: RateSetter £100 bonus - tax treatment

#150209

Postby PinkDalek » July 5th, 2018, 1:51 pm

scrumpyjack wrote:The third alternative is that it is in some way a rebate or discount on fees or management charges, past or future.

The courts ruled that Hargreaves Lansdown's Loyalty bonuses are not taxable for that reason.
https://www.moneymarketing.co.uk/hargre ... ax-battle/

...


HMRC are (un)appealing:

https://economia.icaew.com/en/news/may- ... sdown-case

HMRC has confirmed it is to appeal against the first tier tax tribunal’s decision in favour of financial services group Hargreaves Lansdown over whether or not loyalty bonuses are taxable … It predicted that the case would be completed in the first half of 2019.

For the OP, I don't think the £100 (was £50 at some stage) is interest nor is it subject to CGT. What it might be classed as in an annual payment, upon which Income Tax would be due following completion of your self assessment tax return as no tax appears to have been withheld. If they are annual payments, then the payer should deduct basic rate.

We touched on this back here https://lemonfool.co.uk/viewtopic.php?p=25428#p25428, over at Other Investing, but the link there appears to be broken.

Only guessing but I don't think the Ratesetter Customer Services will be able to assist, despite the suggestion, as they are presumably not permitted to give tax advice.

AleisterCrowley
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Re: RateSetter £100 bonus - tax treatment

#150211

Postby AleisterCrowley » July 5th, 2018, 1:57 pm

I'd forgotten i'd posted that - thanks for the reminder ! Reason it came up is I got the tax statement for the year 'recently'

On the statement it does say Total taxable income (2017/18 tax year) £xxxx with just the interest payments, not including 'cash back'
Suspect HMRC wouldn't accept that as 'proof' ...

DrBunsenHoneydew
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Re: RateSetter £100 bonus - tax treatment

#150221

Postby DrBunsenHoneydew » July 5th, 2018, 2:37 pm

Suppose RateSetter etc gave a £10000 cash back as an incentive to lend out at 0.00001%.

Is HMRC to ignore this obvious tax dodge and let you have it tax-free?

AleisterCrowley
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Re: RateSetter £100 bonus - tax treatment

#150225

Postby AleisterCrowley » July 5th, 2018, 2:43 pm

It is not my place to comment on such things - I just need to know if I need to declare it, given that I have a tax statement from RateSetter with the phrase "Total taxable income (2017/18 tax year)" which doesn't include the bonus/cashback/gift/whatever

DrBunsenHoneydew
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Re: RateSetter £100 bonus - tax treatment

#150229

Postby DrBunsenHoneydew » July 5th, 2018, 2:54 pm

Currently you don't (just like you don't with credit card cashback) but I'm not surprised HMRC are continuing to challenge it.

scrumpyjack
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Re: RateSetter £100 bonus - tax treatment

#150643

Postby scrumpyjack » July 6th, 2018, 10:29 pm

Credit card cashback is certainly not taxable because it is in effect a return of your own money paid for out of taxed income. There is a basic legal principle, I believe, that you cannot make a profit out of yourself.

Where HL rebate some of the commission they receive from unit trusts back to the client, this is an arguable situation as it is not being rebated back to the client out of their taxed income. It may be deemed to be coming out of the unit trusts gross income.So far the courts have agreed with HL that it is not taxable.

So far I don't think HMRC are challenging HL's cash transfer incentives.

Similarly the rebate I receive from Natwest ("Rewards") is a refund of certain payments made by me out of my current account and so not taxable in the same way credit card cashback isn't.

AleisterCrowley
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Re: RateSetter £100 bonus - tax treatment

#150785

Postby AleisterCrowley » July 7th, 2018, 6:34 pm

RateSetter emailed today and confirmed the £100 is not taxable as income


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