hmmm cashback credit card, how to I record the cashback in business books?

Legacy_user

Got a credit card that gives 0.5% cashback on purchases. Say I use it to buy a a £100 printer for the business. So 50p cashback.

Do I just put this 50p as other income, is there any VAT on it?

paddyrg

Is this your own card or the company card?

If yours, you have a receipt for £100 for the printer, the 50p is your own benefit. If the card is the company's then the monthly statement would include a figure you could put in misc income, or as you felt appropriate.

anamenottaken

berbastrike wrote: »

Got a credit card that gives 0.5% cashback on purchases. Say I use it to buy a a £100 printer for the business. So 50p cashback.

Do I just put this 50p as other income, is there any VAT on it?

Cashbacks are not income. They are returning some of your own cash to you.

If it is on a personal credit card, then the cash back actually belongs to the company paying for the, say, £100 printer.

However, it sounds as though you are thinking about a credit card provided by a company (or you are handing the cash back to the company). In that case it is a discount against the cost of the item.

Interesting question about VAT. I would tend to ignore it (for 50p - ie 10p VAT - but not £50 perhaps!). I wonder how businesses giving cash back handle the VAT side of things.

w211

Another related question (sorry, if I appear to be hijacking the thread), what if instead of cashback you get another reward, such as air miles, how would that be calculated in terms of income and VAT?

Tmesis_2

w211 wrote: »

Another related question (sorry, if I appear to be hijacking the thread), what if instead of cashback you get another reward, such as air miles, how would that be calculated in terms of income and VAT?

It's outside the scope of VAT and it isn't income.

Regarding the original question, it's not a discount, as that would have VAT implications. If it's a company credit card, then it's other non-trading income. If it's your personal credit card, then it's yours to keep and doesn't touch the books. It should be accounted for as if gross of VAT.

Edit: to clarify on the discount thing, it has nothing to do with the purchase as you paid full price for the printer with the credit card. The cashback is a payment from the credit card company in return for making purchases on their card, and as such is separate, but there is no VAT exemption/zero-rating so one should assume it has standard rate VAT. If it was a manufacturer cash back (as often seen on cameras, for example) then this would be accounted for as a discount and reduce the VAT reclaim on the purchase (and equally for the supplier reduce their output VAT liability).

mehera

You should not be using a personal cash back card for business use . . . .

Tmesis_2

mehera wrote: »

You should not be using a personal cash back card for business use . . . .

Why would that be? There is no reason why one should not.

LittleVoice

Tmesis wrote: »

It's outside the scope of VAT and it isn't income.

Regarding the original question, it's not a discount, as that would have VAT implications. If it's a company credit card, then it's other non-trading income. If it's your personal credit card, then it's yours to keep and doesn't touch the books. It should be accounted for as if gross of VAT.

Edit: to clarify on the discount thing, it has nothing to do with the purchase as you paid full price for the printer with the credit card. The cashback is a payment from the credit card company in return for making purchases on their card, and as such is separate, but there is no VAT exemption/zero-rating so one should assume it has standard rate VAT. If it was a manufacturer cash back (as often seen on cameras, for example) then this would be accounted for as a discount and reduce the VAT reclaim on the purchase (and equally for the supplier reduce their output VAT liability).

You say "it isn't income" and yet "it's other non-trading income". Which is it?

Why should it be any kind of income?

If cash back re purchases on a personal credit card is not income, why should it be for businesses? It's just your own money coming back to you and not taxable. If it is income, then it's taxable.

CKhalvashi

Tmesis wrote: »

Why would that be? There is no reason why one should not.

It's probably against the Ts and Cs.

I do use mine, however, and this hasn't been pulled.

CK

LittleVoice

mehera wrote: »

You should not be using a personal cash back card for business use . . . .

HMRC say, "Personal credit cards may also be used to pay business expenditure later reimbursed by the business." (see http://www.hmrc.gov.uk/manuals/cogmanual/COG940950.htm )

Of course, the business entity may include a term in its employment contract that says employees must not use such cards for business expenses but we don't know that that's relevant to the OP.

DJBenson

mehera wrote: »

You should not be using a personal cash back card for business use . . . .

With all due respect, this is nonsense. If I worked for a business (say I worked for MSE) and I bought lunch and paid for fuel whilst on company business, MSE nor HMRC can dictate how I disburse those expenses so long as I provide valid receipts for reimbursement. It's absolutely no different when you run our own company.

I'm an IT Contractor operating a limited company and regularly purchase IT equipment using my personal credit card for two reasons 1) my business credit limit is stupidly low and 2) I get a kickback from using my own card (e.g. Points etc.)

The only person who might have a problem with number 2 is the director of the company...and that would be me (...and the misus :beer:)