Cash back incentives

Cash back incentives

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I have recently set up my own accountancy practice and was considering launching some sort of scheme which incentivises people for referring business my way.

I know that a lot of recruitment agents use a similar scheme where they offer say, £50 cash incentive, if you find them a candidate that they in turn find a job for. Are there certain criteria that have to be achieved for the scheme to be allowed?

I was looking to do something similar where I offer a cash incentive to people that refer me to potential business, and if they sign up, I will pay. I have had a little look around but can't find much information of how a scheme like this works from an accounting and tax treatment point of view. I can only seem to find tax treatment for cash incentives to employees which is not what I am looking to do. Would this be an allowable expense on my behalf?

Obviously if a current client refers business, instead of cash back I could offer credit against my fees which would be easier. However I don't want to be limited to just my own clients.

Any information on such a scheme would be greatly appreciated.

Replies (1)

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By rohit
21st Nov 2012 16:48

Accounting Treatment

So you are using a cash reward for the acquisition of clients. This is the same as using any other advertising channel so perhaps the accounting treatment should be

Dr P&L (Variable Cost - Advertising)

Cr Bank (posted to marketing GL account when payment comes out of bank).

Tax Treatment

It obviously isn't a BIK so no Class 1A NIC. The commission is paid to someone who isnt an employee so guess no employer NI due either. IMO it should be the responsibility of the person who receives the fees to account for on self assessment.

Should be tax allowable/deductible like any other marketing expenditure.

Can someone else comment on this?

Thanks (1)