Tax reporting of the Nationwide 'fair share' payment

35har1old

MattMattMattUK said:

Imvrasos said:

Posting a new thread as the main one revolves around the eligibility criteria.

The decision by Nationwide to report this as 'interest' is absurd. Interest is a return arising from loaned or saved funds, this payment has nothing to do with this. It is a form of Nationwide returning some profits to its customers, hence a form of dividend and should be reported as such, to be taxed under the dividend allowance, not the savings allowance.

The only reason Nationwide aim to report it as interest, and not as a dividend, is to streamline their own admin, as they already report interest earnings anyway. This way they can fully automate the reporting instead of setting a new dividend reporting admin team and process. 

Unsure how this could stand if legally challenged or if HMRC decides to look into it, I think tax law may have a slight priority over private businesses trying to create admin efficiencies.  

Your post seems to be trying to report your unsubstantiated opinion as fact. They will have taken legal advice before categorising it as interest, they will almost certainly have spoken to HMRC ahead of this as well and had it signed off. The decision will have been based on the law, not on admin. The payment is specifically not a dividend and cannot be under law, the members are not shareholders, Nationwide is a building society/mutual organisation and as such as no ability to issue a dividend, this payment is not a dividend. Interest has a much wider definition, easily wide enough to say that using the criteria they have used the payment is a discretionary interest payment (rather than contractual), which is what they have done.

Why are you so irate about this being correctly categorised as interest? 

It's a reward payment just like Halifax £60 x 3 a year and they pay the tax

masonic

35har1old said:

MattMattMattUK said:

Imvrasos said:

Posting a new thread as the main one revolves around the eligibility criteria.

The decision by Nationwide to report this as 'interest' is absurd. Interest is a return arising from loaned or saved funds, this payment has nothing to do with this. It is a form of Nationwide returning some profits to its customers, hence a form of dividend and should be reported as such, to be taxed under the dividend allowance, not the savings allowance.

The only reason Nationwide aim to report it as interest, and not as a dividend, is to streamline their own admin, as they already report interest earnings anyway. This way they can fully automate the reporting instead of setting a new dividend reporting admin team and process. 

Unsure how this could stand if legally challenged or if HMRC decides to look into it, I think tax law may have a slight priority over private businesses trying to create admin efficiencies.  

Your post seems to be trying to report your unsubstantiated opinion as fact. They will have taken legal advice before categorising it as interest, they will almost certainly have spoken to HMRC ahead of this as well and had it signed off. The decision will have been based on the law, not on admin. The payment is specifically not a dividend and cannot be under law, the members are not shareholders, Nationwide is a building society/mutual organisation and as such as no ability to issue a dividend, this payment is not a dividend. Interest has a much wider definition, easily wide enough to say that using the criteria they have used the payment is a discretionary interest payment (rather than contractual), which is what they have done.

Why are you so irate about this being correctly categorised as interest? 

It's a reward payment just like Halifax £60 x 3 a year and they pay the tax

Halifax have two separate schemes, one that is structured as cashback for debit card spending, and one that is structured as an annual payment for maintaining a balance in a non-interest-bearing account. One is tax free and the other is taxed at source. Unlike Nationwide, both are contractual payments where customers sign up to an agreement in advance to receive them.

TheBanker

Credit Unions call their interest payments dividends, although they're based on the account balance so would commonly be understood to be interest, and are taxed as interest. Sharia accounts don't pay interest but they pay a 'profit'. The profit is expressed as a percentage, just like interest. The difference is that CU Dividends and Sharia profit are not contractual, interest is. 

I mention this just to make the point that it's not black and white, and the common understanding of 'dividends' and 'interest' are not exactly aligned to tax laws and rules. 

Nationwide aren't calling the £100 interest. They're saying it will be taxed as interest. For most people it will be advantageous or make no difference compared to taxing it as income. 

35har1old

masonic said:

35har1old said:

MattMattMattUK said:

Imvrasos said:

Posting a new thread as the main one revolves around the eligibility criteria.

The decision by Nationwide to report this as 'interest' is absurd. Interest is a return arising from loaned or saved funds, this payment has nothing to do with this. It is a form of Nationwide returning some profits to its customers, hence a form of dividend and should be reported as such, to be taxed under the dividend allowance, not the savings allowance.

The only reason Nationwide aim to report it as interest, and not as a dividend, is to streamline their own admin, as they already report interest earnings anyway. This way they can fully automate the reporting instead of setting a new dividend reporting admin team and process. 

Unsure how this could stand if legally challenged or if HMRC decides to look into it, I think tax law may have a slight priority over private businesses trying to create admin efficiencies.  

Your post seems to be trying to report your unsubstantiated opinion as fact. They will have taken legal advice before categorising it as interest, they will almost certainly have spoken to HMRC ahead of this as well and had it signed off. The decision will have been based on the law, not on admin. The payment is specifically not a dividend and cannot be under law, the members are not shareholders, Nationwide is a building society/mutual organisation and as such as no ability to issue a dividend, this payment is not a dividend. Interest has a much wider definition, easily wide enough to say that using the criteria they have used the payment is a discretionary interest payment (rather than contractual), which is what they have done.

Why are you so irate about this being correctly categorised as interest? 

It's a reward payment just like Halifax £60 x 3 a year and they pay the tax

Halifax have two separate schemes, one that is structured as cashback for debit card spending, and one that is structured as an annual payment for maintaining a balance in a non-interest-bearing account. One is tax free and the other is taxed at source. Unlike Nationwide, both are contractual payments where customers sign up to an agreement in advance to receive them.

On viewing the account under header transaction type the usual interest payments it says interest but for the reward payment  this is left blank
If this reward is classed as taxable why are switching incentives not

masonic

35har1old said:

masonic said:

35har1old said:

MattMattMattUK said:

Imvrasos said:

Posting a new thread as the main one revolves around the eligibility criteria.

The decision by Nationwide to report this as 'interest' is absurd. Interest is a return arising from loaned or saved funds, this payment has nothing to do with this. It is a form of Nationwide returning some profits to its customers, hence a form of dividend and should be reported as such, to be taxed under the dividend allowance, not the savings allowance.

The only reason Nationwide aim to report it as interest, and not as a dividend, is to streamline their own admin, as they already report interest earnings anyway. This way they can fully automate the reporting instead of setting a new dividend reporting admin team and process. 

Unsure how this could stand if legally challenged or if HMRC decides to look into it, I think tax law may have a slight priority over private businesses trying to create admin efficiencies.  

Your post seems to be trying to report your unsubstantiated opinion as fact. They will have taken legal advice before categorising it as interest, they will almost certainly have spoken to HMRC ahead of this as well and had it signed off. The decision will have been based on the law, not on admin. The payment is specifically not a dividend and cannot be under law, the members are not shareholders, Nationwide is a building society/mutual organisation and as such as no ability to issue a dividend, this payment is not a dividend. Interest has a much wider definition, easily wide enough to say that using the criteria they have used the payment is a discretionary interest payment (rather than contractual), which is what they have done.

Why are you so irate about this being correctly categorised as interest? 

It's a reward payment just like Halifax £60 x 3 a year and they pay the tax

Halifax have two separate schemes, one that is structured as cashback for debit card spending, and one that is structured as an annual payment for maintaining a balance in a non-interest-bearing account. One is tax free and the other is taxed at source. Unlike Nationwide, both are contractual payments where customers sign up to an agreement in advance to receive them.

On viewing the account under header transaction type the usual interest payments it says interest but for the reward payment  this is left blank
If this reward is classed as taxable why are switching incentives not

It's taxable because it is a recurring payment, whereas a switching incentive is one-off. Any such payment that is non-discretionary, capable of recurring over more than a year, and pure profit to the recipient is an 'annual payment', which is taxable as other income. One type of Halifax Reward Extra meets those criteria, while the other does not, and neither does a switching incentive.

I wouldn't have thought the £5 per month reward (net of basic rate tax) for keeping £5000 in your current account would appeal to anyone any more, as far more can be earned on this money in interest-bearing accounts.