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Posted Thu, 13 Jul 2023 10:25:48 GMT by newluke16
Hi, I get paid £60 to refer new customers to a furniture business. I would like to pay a person £50 if they either: (A) Buy furniture from a shop (not owned or run by me). Or.. (B) Refer another person to buy furniture from that shop. This is a marketing expense for me but I'm not sure how to handle the payment to the person. #1 Do I pay income tax etc on the £10 profit or do I pay tax on the whole £60? #2 Would I record this £50 expense as marketing, commission, reward, bonus, referral fee? #3 All transaction will be through my main business bank account with dates/names/address recorded, would this be enough proof of the expense or would I somehow need to ask the customer to invoice me?
Posted Tue, 18 Jul 2023 13:54:55 GMT by HMRC Admin 19

The following guidance covers a deduction for commission passed on to customers:    

BIM40670 - Specific receipts: insurance and other commission: deduction for commission passed on to customers

You could use either box 17 or 30 on the SA103, or the online equivalents, if the expenses are allowable.  

You may find it beneficial to read the following guidance which covers the topic of commission:

BIM40650 - Specific receipts: insurance and other commission: contents

Thank you.

Posted Wed, 19 Jul 2023 09:33:34 GMT by newluke16
I'm not an insurance provider or agent, does the BIM40650 guidance apply to me? I would still like my original questions answered please especially #3 above. Box 17 includes "commissions, and any discounts".. Although I'm providing cashback to the customer, they actually bought from a furniture shop, not me. To be classed as a cashback or discount must this come directly from who the customer originally paid i.e the furniture store? Thank you
Posted Tue, 25 Jul 2023 13:39:41 GMT by HMRC Admin 32

Yes, as a individual in receipt of 'referral fee commission', the guidance at BIM40650 does apply, and cashback or discount payments can be claimed as an expense.                                            
Expenses if you're self-employed

Thank you.

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