I run an online store.
Our customers get enrolled in our rewards scheme when they buy from us.
For example, a customer makes a purchase for £100, they then have an account credit for 5% (£5) to use against future purchases etc.
So at any given time we have a liability for the sum of all these debts.
However, not all customers become repeat customers, and those that do often buy much more. Up to now we've been ignoring this liability on our accounts.
But now it's over 50k, and I'm wondering if I should treat it as a liability, and so use it to reduce our profits and Corporation tax.
Is this allowable? Any suggestions how it's accounted for and what is the correct procedure in this case.