Tax on Halifax Reward

dougz_2

I seem to remember reading, in the depths of HMRC online manuals somewhere, that the factor determining that tax needed to be payed was if the payment was regularly reoccuring, hence why the Reward Current monthly £5 is, but the one off £100 deals are not. But that still doesn't explain why the Clarity CC monthly £5 isn't though does it?

As for the hassle to non taxpayers of reclaiming via R40, one way around that might be to donate the fivers to charity while simply ticking the Gift Aid box, although this would have to be done during the same tax year, see http://www.hmrc.gov.uk/individuals/giving/gift-aid.htm

glider3560

dougz wrote: »

But that still doesn't explain why the Clarity CC monthly £5 isn't though does it?

I think that isn't subject to tax as it is applied towards a bill, i.e. a credit card bill. I suppose this is the same way as Ovo Energy don't need to deduct income tax from their "Interest Reward" as the interest is applied directly to the balance owed.

dougz_2

glider3560 wrote: »

I think that isn't subject to tax as it is applied towards a bill, i.e. a credit card bill

Yes but you can get billed for various services on a current account too. So why do they still deduct tax from the £6.25 monthly reward on an account that is also being billed £1 a day for being overdrawn?

masonic

dougz wrote: »

Yes but you can get billed for various services on a current account too. So why do they still deduct tax from the £6.25 monthly reward on an account that is also being billed £1 a day for being overdrawn?

Paying £1 a day for an overdraft is optional. You can stay in credit and not pay anything. I doubt either Halifax or HMRC wanted to complicate the situation by offsetting the tax against any charges made during the month.

dougz_2

masonic wrote: »

Paying £1 a day for an overdraft is optional. You can stay in credit and not pay anything.

But the same applies to Clarity CC surely, so why isn't that reward also taxed?

masonic

dougz wrote: »

But the same applies to Clarity CC surely, so why isn't that reward also taxed?

Because it's not possible to get the reward (or discount) without spending on the card. It's the same as the interest paid by Ovo Energy. It's applied to the balance owed.

dougz_2

But presumably you could still get the Clarity reward without ever having a balance owed, by simply having made a payment to the card early. So the reward may pay off an amount owed, or it may put your balance in credit, just the same as with the current account.

noh

If you really want to you can read HMRC manuals on the subject. Start here
http://www.hmrc.gov.uk/manuals/saimmanual/saim8010.htm

then follow the link from the next page to here

http://www.hmrc.gov.uk/manuals/saimmanual/SAIM8050.htm

see example 3.


All looks complicated and is based on case law.

The Reward Current Account £5 is regarded as an "annual payment" and is subject to income tax.

The Clarity Card £5 payment is regarded as a rebate so is not income therefore is not subject to income tax.

masonic

What noh said.

The difference between the credit card and the current account is that, in the case of the current account, the reward cannot be seen as a rebate because no expenditure is necessary in order to receive it.