Bank Account Fees and the Taxman

polymaff

MSE'ers facing significantly higher fixed fees on their Santander 123 bank accounts would welcome an MSE-led campaign to be treated on the same basis as the self-employed, businesses and companies with respect to these fees - i.e. that they can treat the fees as an allowable expense against related income.

I say "related income" as this process is as much of a business as being a plumber or an accountant. Specifically, the fees are incurred "wholly and exclusively" (HMRC's own terminology) in the process of creating income from that business - No Fee Paid, No Income Received - and it would be accepted that the fee could only be offset against that income generated by the payment of the fee.

How about it, MSE? It is not just Santander 123 bank accounts this would be relevant to. Barclays Blue Reward - and maybe, others, too.

agrinnall

Knock yourself out, but don't come crying to us when it ends in complete failure.

realaledrinker

So you would be happy to pay tax on the cashback presumably ...

polymaff

realaledrinker wrote: »

So you would be happy to pay tax on the cashback presumably ...

No, as the cash returned is already nett of income tax.

JuicyJesus

I'm not an accountant, but my inclination is that, quite simply, income tax does not work that way. You're given over £10,000 of tax relief on your income to go towards personal expenses already.

Also, business expenditures are just that; for a business. Business bank charges are an expense of the business; personal bank charges are a personal expense which is captured within the personal allowance. You are given tax relief on business expenses to ensure that the owner of a small business is taxed only on profit against reasonable expenditure; there is no particular reason that someone who is employed by someone else and therefore effectively receives all of their income as "profit" should receive the same tax break over and above the personal allowance.

Archi_Bald

Imagine the uproar if MSE campaigned for "the rich" [who can afford chargeable bank accounts, and have savings] to be given tax relief on bank charges.

Even without uproar, the idea wouldn't fly for a number of practical reasons, such as costing an absolute fortune to administer, for everyone involved.

Zanderman

polymaff wrote: »

MSE'ers facing significantly higher fixed fees on their Santander 123 bank accounts would welcome an MSE-led campaign to be treated on the same basis as the self-employed, businesses and companies with respect to these fees - i.e. that they can treat the fees as an allowable expense against related income.

I say "related income" as this process is as much of a business as being a plumber or an accountant. Specifically, the fees are incurred "wholly and exclusively" (HMRC's own terminology) in the process of creating income from that business - No Fee Paid, No Income Received - and it would be accepted that the fee could only be offset against that income generated by the payment of the fee.

How about it, MSE? It is not just Santander 123 bank accounts this would be relevant to. Barclays Blue Reward - and maybe, others, too.

Que? The fee you're paying is for the service the bank provides. You are buying something. I don't see how you can argue that this could be offset against tax unless the 'something' is an essential to your business. In this case it isn't - as these are personal accounts, not business ones.

And anyway the fee has nothing whatsoever to do with your income as far as I can see (how do make that link? the only related money is the cashback - which is just money returned, not income, and interest, which may, or may not, be dependent on the fee being paid but won't be taxed soon anyway).

polymaff

Archi_Bald wrote: »

Imagine the uproar if MSE campaigned for "the rich" [who can afford chargeable bank accounts, and have savings] to be given tax relief on bank charges.

Even without uproar, the idea wouldn't fly for a number of practical reasons, such as costing an absolute fortune to administer, for everyone involved.

Oh, quite. Very unprogressive and the Corbyns of this world would probably have me shot for even suggesting it.

As for implementation, just note how clumsy the latest adjustments (PSA, Dividend Taxation, etc.) to Income Tax are. Surely there is room for another?

polymaff

JuicyJesus wrote: »

I'm not an accountant, but my inclination is that, quite simply, income tax does not work that way. You're given over £10,000 of tax relief on your income to go towards personal expenses already.

Also, business expenditures are just that; for a business. Business bank charges are an expense of the business; personal bank charges are a personal expense which is captured within the personal allowance. You are given tax relief on business expenses to ensure that the owner of a small business is taxed only on profit against reasonable expenditure; there is no particular reason that someone who is employed by someone else and therefore effectively receives all of their income as "profit" should receive the same tax break over and above the personal allowance.

This is not a tax relief. It is an expense incurred. There are plenty of precedents for such expenses to be allowed.

As I made clear, I think that serious MSE'ers are running businesses, as they spend their time and their money - at their risk - generating income. They should therefore be taxed on their profit, not their income inflow.

And the personal allowance is merely an artifact of a so-called "progressive" tax system.

polymaff

Zanderman wrote: »

Que? The fee you're paying is for the service the bank provides. You are buying something. I don't see how you can argue that this could be offset against tax unless the 'something' is an essential to your business. In this case it isn't - as these are personal accounts, not business ones. .

I'm clearly arguing that this IS a business to serious MSEers.

Zanderman wrote: »

And anyway the fee has nothing whatsoever to do with your income... ).

"The monthly account fee will be due even if you don't qualify for cashback/interest benefits in a specific month.". Rather disproves your statement.

Zanderman wrote: »

and interest, which may, or may not, be dependent on the fee being paid but won't be taxed soon anyway).

Wrong and wrong. Firstly by the quote from Santander above, it is utterly dependent on the fee being paid. Secondly, it is taxable savings income which, depending upon the individual taxpayer's circumstances, will be taxed at 0%, 20%, 40% or 45%.

colsten

polymaff wrote: »

I'm clearly arguing that this IS a business to serious MSEers.

If that was so, you would be in breach of the current account T&Cs as none of them can be used for business purposes. That alone kills your idea stone-dead. But even if the idea wasn't DOA, you would also be liable for business taxation and no longer eligible to receive any personal allowance for your interest.


You haven't really thought this through, have you. In other words, it's a bonkers idea.