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Sending money to a business in form of cashback

How to account for cashback sent to a business for a referral. Both for them and us. Tax free?

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We're looking to offer cashback to our clients for referring other people to us. We are a limited business that isn't VAT registered, can we advertise it as a tax-free sum? We're looking at cashback figures ranging from £25 to £75? Can we class this as a business expense on our end as well? 

 

 

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By David Ex
29th Nov 2021 11:04

dw_graham wrote:

can we advertise it as a tax-free sum?

I wouldn’t start offering tax advice to customers unless you are an accountant, which I’m guessing you aren’t.

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By paul.benny
29th Nov 2021 12:08

You're describing a referral fee or commission. Such things are normally taxable in the hands of the recipient and deductible by the payer.

In effect, the recipient has provided a service of introducing customers to you, so if they are VAT-registered, they probably have to account for VAT on the sums received.

You should also think about getting an accountant for when further questions like this arise.

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