Is the Chip App bonus Taxable?

quirkydeptless

From https://getchip.uk/terms/

"7. Bonuses

7.1 From time to time, users may be eligible to receive a bonus payment from Chip (“Bonus”) based on the funds held in their Wallet. A Bonus is not interest and there is no contractual or statutory right to interest on funds in your Wallet."

I've not been able to find any information on HMRC reporting and the Chip App.

So is this bonus taxable?

If so, how have existing users dealt with Tax reporting if it is not interest?

bowlhead99

My gut feel would be that it is similar to either an 'annual payment' (like those Halifax reward accounts that give you £2 a month just for meeting their conditions) - which is taxable ; or a type of referral fee income for putting other clients / savers their way - which is taxable.

They have explicitly confirmed it is not interest, so you can't use your personal savings interest allowance for it. So it would seem to essentially be 'other income', taxable at your marginal rate. As they don't charge you fees for their service it is difficult to argue it's cost reduction / cashback.

Though whether it actually qualifies as an 'annual payment' obligation which has basic rate tax deducted at source will depend on what they have argued with HMRC (and they may have not even told HMRC they are doing it).

To me it smells a little like 'annual payment' treatment because it has most of the features of that sort of thing:

-they have an obligation to pay it (they advertise bonus rates on their website which seems to be an 'offer' to pay the bonus capable of 'acceptance' by the customer - basic contract law); though extra unadvertised bonuses from time to time may not be so clear cut.

- capable of periodic recurrence

- is clearly income in nature rather than return of capital

However - they are giving you money as a result of you taking some action (put money in a non-interest bearing client money account with their preferred e-money provider and keeping it there, and perhaps refer clients to them) so it may not be 'pure income profit' to you in the sense of annual payments like royalties, so they may not need to do the tax deduction at source thing like Halifax do

But whether or not it qualifies for 'annual payment' treatment like Halifax, it seems like they are paying you an income which is not linked to you ever paying them for goods or services (as they advertise that their service is free), so from a tax point of view you would be on shaky ground calling it non-taxable cashback rather than taxable income.

If you do not do a self-assessment tax return and the amounts are small, you could just tell HMRC you have some other income to declare and have them adjust your tax code.

Personally I don't have an account with them because cash you send to them (or that they sweep from your bank account) is not FSCS protected, it is just held by their partner e-money provider / payments provider business.

Although it should in theory be in a segregated customer money account (along with all their other customer money, but away from their own business operations), it does not get proper consumer protection like a deposit in a bank account would. While I might be happy using one of these money providers temporarily (e.g. doing a one off currency transaction ahead of a holiday or whatever) I wouldn't want them to hold my money all year, as there is a lot of difference between a fintech startup and a regulated bank startup.

Not to take your thread off topic, just explaining why I'm not a client of theirs and haven't needed to deal with explaining income from them to the taxman

Reed_Richards

I hold OEICs with a big broker and get a partial refund of the charges. Following advice from the broker, I declare this as an "annual payment" on my tax return. I mention this as another example, apart from "reward accounts", where you would declare an annual payment.

quirkydeptless

I contacted their support message service this morning which came back very promptly informing me that is isn't taxable.


I expect it would need to be declared on a SA as described above.

Reed_Richards

quirkydeptless wrote: »

I contacted their support message service this morning which came back very promptly informing me that is isn't taxable..

I suspect that what they mean by this is that they do not deduct any tax. It is up to HMRC to decide if this constitutes a form of income, which would be taxable, or a gift or prize which, generally, would not be.

matty_art

I had the same reply from Chip saying “our bonus is tax free so not required to be added on a tax summary”.

I’m not convinced.... I think it probably needs declaring as how can it not?