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Small and medium-sized businesses have been receiving a “cashback” payment when they have taken out a business loan. Is this subject to tax?
More than one of my small or medium-sized sole trader and partnership clients are involved in capital-intensive trading businesses. Several have recently taken out a new bank loan and have received a “cashback” of up to 2% in addition to the amount borrowed. My question is how is this cashback taxed if at all?
My researches have yielded references to this in HMRC’s Property Income Manual at paragraph PIM2056 which suggests that a one-off payment is unlikely to be taxable.
HMRC’s statement of practice SP4/97 (on the “taxation of commission cashbacks and discounts”) distinguishes between private and business transactions but it is not clear if this covers the present situation.
I would also like to know whether it would it make a difference if the client operated as a limited company.
Readers’ suggestions would be very welcome here.
Query 18 261 – Cashback
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