Coupons

Coupons

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Can't decide if I should be too embarassed to ask this question really and in any event the amounts are usually so small and infrequent its never been an issue.

Now have a small ltd co client that frequently buys their cleaning products, bin bags, milk, tea bags etc from supermarket and on the receipts they often have a coupon deduction from the total of the receipt.

So do we lower the expense in the accounts or keep the original amount and claim the coupon value as capital introduced?

At a guess I would say perhaps it depends on the where and reason why the coupon was obtained so if they were only doing their business/office shop at that particular supermarket, it would be as some kind of loyalty incentive/discount and therefore the expense claimed should be lower. But if they also did their personal shopping there (they do separate shops or at least have separate receipts) or cut a coupon out of a magazine, I would have thought that was capital introduced?

In practical terms, who could be bothered to keep track of that IF my thoughts are anywhere near the mark! Anyone know what HMRC view is? I'm anticipating client or my trainee asking the question so regardless of the sums involved, I feel ought to know the answer to this!!

Replies (3)

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Stepurhan
By stepurhan
07th Apr 2014 16:11

Over-thinking

Just treat the expense as the discounted figure.

For practical purposes, it is the same as if they bought something cheaper because there was two-for-one offer in-store or a short-term promotional price. You are only thinking there is more to it because there is an external coupon involved. The fact is that your customer is simply paying less for their goods, regardless of the reason why.

There is possibly an element of capital introduced where money-off coupons are obtained from loyalty points. Some of those are likely to have been earned on private shopping. For the amounts involved, even HMRC are likely to view it as not worth the hassle.

Not directly related to your query as written, but HMRC's view for VAT purposes agrees with this. The vendor only has to account for VAT on what they are paid by the customer when they use a coupon. This would include any payment they received for the coupon itself.

http://www.hmrc.gov.uk/vat/managing/charging/discounts-etc.htm

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By Paul Hawes
07th Apr 2014 16:41

Seems logical..

That it would depend on where you obtained the vouchers from. Say you needed to buy goods and the voucher you used was obtained personally rather than through the actions of the business, then I would say that should be capital introduced and claim the full expense. The amount you may save in tax is probably minimal though unless you have large value vouchers. I don't know what HMRC's stance on this is though and it's just an opinion.

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Stepurhan
By stepurhan
07th Apr 2014 16:58

Not generally capital introduced

I should be clear that, subject to the loyalty points I mentioned, I do not see a justification for treating a simple money-off coupon as capital introduced. The argument for doing so is solely based on the fact that the coupon COULD have been used for a private purchase. There is no way of proving it WOULD have been so used. Unless there was a cost to obtaining the coupon I think you would struggle with any argument with HMRC on this point. Wear and tear on your private scissors cutting it out is unlikely to be enough. :-)

By contrast, face value vouchers are treated as cash for most tax purposes, and could be treated as capital introduced. These will usually have a cost of obtaining them that is equivalent to the reduction in the cost of the subsequent purchase though.

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