UC Self employed - should I put bank account switching incentives as income?

seatbeltnoob

Three scenarions.

1) An employed person on UC who gets £200 to swith their personal current accounts

2) A self employed UC claimant who gets £200 to switch their personal current accounts.

3) A self employed UC claimant who gets £200 to switch their ltd co business accounts

There were some good incentives to switch business bank accounts, I did a business current account switch and a business savings account switch and earnt £400 in the last 6 months.

The first one I did report as income. I just had my second one paid and haven't filed my UC income and expenses. Do I report this as income?

My position is #3 scenario from above. But I'd like you to give your thoughts on the other scenario as well.

huckster

It is not income or earnings. Just a change to capital money  savings and investments.

seatbeltnoob

huckster said:

It is not income or earnings. Just a change to capital money  savings and investments.

That's good to know, I'll get the wife in on the bank switching game.

TimeLord1

1. Capital 
2. Capital 
3. Income: A £200 incentive for switching your business bank account is more likely to be treated as income for your self-employment.

huckster

3) increase in business capital so not relevant to UC. This is not income directly related to working hours as a self employed person.

Yamor

I agree with @TimeLord1.
HMRC consider such cash-back as trading income, and the legislation for UC is sufficiently similar to the tax legislation to say that it is likely to be the case there too.

See UC Regs, reg. 57(2)(a) and ITTOIA, s. 31E(2).

sheramber

HMRC consider them like commission so are income and taxable for business accounts

https://www.accountingweb.co.uk/any-answers/hmrcs-response-re-rbsnatwest-switching-incentive?amp

huckster

 Capital held by the business in business accounts is disregarded by Universal Credit. Any incentive offered by a Bank to switch business accounts is arguably  likely to be based partly on capital held and partly maintaining orderly running of business accounts. Such an incentive might well be seen as income by HMRC,  but not sure it would be by Universal Credit.

This is one of those arguable grey areas, where the legislation does not cover exactly how money incentives offered by financial organisations is treated.

HillStreetBlues

huckster said:

 Capital held by the business in business accounts is disregarded by Universal Credit. Any incentive offered by a Bank to switch business accounts is arguably  likely to be based partly on capital held and partly maintaining orderly running of business accounts. Such an incentive might well be seen as income by HMRC,  but not sure it would be by Universal Credit.

This is one of those arguable grey areas, where the legislation does not cover exactly how money incentives offered by financial organisations is treated.

My feeling would be because the regs doesn't cover it, then it would be hard to exclude it from being a receipt of monies.

seatbeltnoob

HillStreetBlues said:

huckster said:

 Capital held by the business in business accounts is disregarded by Universal Credit. Any incentive offered by a Bank to switch business accounts is arguably  likely to be based partly on capital held and partly maintaining orderly running of business accounts. Such an incentive might well be seen as income by HMRC,  but not sure it would be by Universal Credit.

This is one of those arguable grey areas, where the legislation does not cover exactly how money incentives offered by financial organisations is treated.

My feeling would be because the regs doesn't cover it, then it would be hard to exclude it from being a receipt of monies.

I didn't ask UC yet because I know they will default to it being income unless you can prove it's not income.

NedS

I don't know the answer and it's not covered in guidance, so my gut interpretation is that because UC uses a simple cash flow model (cash in, cash out), it's cash into the business and should therefore be declared regardless of whether it falls as earned income or not.

If bank fees are an allowable expense (cash out) why would bank bonuses/incentives/credits not be deemed income (cash in)? My bank (not a business account) charges me a £5 monthly fee which they then refund if I've met certain conditions for the month. It would not seem right to claim the £5 fee as an expense but fail to declare the £5 refund as income each month

As always, I reserve the right to be wrong