A business promotion and tax implications

nursery2011

Hi all hope someone can help

We run a small childrens nursery and are trying to get more children in. We are concentrating on 3 and 4 year olds who get 15 hours funded care per week paid for by the government. My idea is to offer the parents £100 as a welcome bonus after they have been with us for 3 months. Now my question is, will this have to be declared as income by all recipients therefore taxable, is it tax deductable for us a business? are there any better more tax efficient ways of offering this promotion, maybe through vouchers or some other way?
Your help is much appreciated.... to clarify the parents will never have paid us any money, we are giving them money from the nursery

thanks

antrobus

nursery2011 wrote: »

My idea is to offer the parents £100 as a welcome bonus after they have been with us for 3 months.

As in actually give them a £100 cheque, I presume.

nursery2011 wrote: »

Now my question is, will this have to be declared as income by all recipients therefore taxable...

No, don't believe so. I have yet to receive an income tax demand in respect of all Tesco clubcard vouchers etc etc. It's quite common for businesses to offer cashback as a marketing incentive - it's just another form of discount

nursery2011 wrote: »

...is it tax deductable for us a business?

Yes. As above, you would not be the first to do this sort of thing.

nursery2011 wrote: »

.... to clarify the parents will never have paid us any money, we are giving them money from the nursery

Ah well, that might be the issue. The care is paid for by the government, but chosen by the parents, and you want to give them a £100 kickback to get them to choose you rather than somebody else. I think I'd be more concerned about what it said in the relevant legislation regarding this particular funding scheme. As in, it might be specifically prohibited by section something of a particular act, or indeed generally regarded by the powers that be as an abuse of pulic funds?

ceeforcat

Agree with antrobus but have you considered simply reducing month four payment by £100 - I think it would remove all doubt from the above.

tyllwyd

I'd be more inclined to offer a non-cash incentive - a free tshirt and bag, or extra free sessions etc