Barclays Cashback

Hi Admin, I am about to open a "Barclays Blue Reward" account from Barclays Bank Plc. There is monthly fee of £5 for this account. There are various rewards if I satisfy certain requirement. One of the rewards, "Loyalty Rewards" says that a customer will be rewarded £5 a month for having two Direct Debits linked to the said account. Barclays has confirmed in their website which says "All other current rewards earned through Blue Rewards, and any Loyalty Reward received from December 2016, are not subject to UK income tax." (https://www.barclays.co.uk/help/accounts/added-features/tax-blue-rewards/) Can I confirm with you that the concerned Loyalty Reward as mentioned above, is not subject to UK tax and thus does not need to be declared? I have read your guidance - SAIM8050 - Annual payments: examples, but I wish to have a confirmation from you. Many thanks.

Hi,
 

This income is still taxable, just not at source by the bank. It should be declared as other income in order for the tax to be charged. If you complete a tax return, shis should be shown on SA101 at box 3. See : Savings and Investment Manual   .

Thank you.

Hi HMRC Admin 17 It might help us to explain why you believe this income is still taxable. Your link to Savings and Investment Manual goes to 'SAIM8020 - Annual payments: meaning of annual payment - Characteristics of an annual payment'. That sets four tests that must be satisfied for Customer Rewards/Cashbacks to count as an Annual Payment. It doesn't mention "Paying a fee" as one of the tests. So I imagine that JCC's description leads you to conclude that he is getting the Loyalty Reward just for having 2 debit cards AND not having to do anything else to earn the reward. Therefore it qualifies as 'Pure Income Profit' (Test 4, "It must represent pure income profit to the recipient. A sum is ‘pure income profit’ if - like interest - it comes to the recipient without he or she having to do anything in return.") I have a Santander 123 account and pay £5 per month fee for the privilege of having the account. With it I earn Cashbacks on certain transactions (not all) and the Cashbacks vary in amounts and consistency. I have to make certain purchases and pay certain bills to earn Cashbacks. So I am having to do things in return, and there are no Cashbacks if I do not make those certain purchases/payments. I believe this fails Test 4 and therefore my Cashbacks are not Annual Payments and therefore not Taxable as Income or Other Income. Do you agree with this? Kind regards, Tarp

Sorry my previous post had an error. I said "having 2 debit cards " whereas I note that JCC said " two Direct Debits". I don't think that typo changes the points I am making. 

Hi James, Whilst you await the response from the HMRC, may I pop-in to also raise a question. I have no expertise in accounting but from the guidelines you retrieved from SAIM:8020 and in particular Test 4, which provides( "It must represent pure income profit to the recipient. A sum is ‘pure income profit’ if - like interest - it comes to the recipient without he or she having to do anything in return.") , I wonder the nature of setting up and continuing two successful monthly Direct Debits, which if stopped would otherwise lead to stopping of the Barclays Rewards for a particular month, would suffice to mean "he or she having to do anything in return", and therefore qualify as Pure Income Profit. The "Anything" in the case of Barclays refers to setting up and having successful transactions via Direct Debits, whereas in the case of Santander 123 as what you mentioned requires particular transactions. I cannot find any difference in their natures. At all, "he or she has to do something" to get that rewards. Dear Admin, Can you please clarify your views towards these circumstances under SAIM8020 or any other sections you deem applicable, with regards to the tax status of these rewards? Thank you.

Hi James Peewee,

Some bank accounts pay a loyalty reward each month to the account holder.  

These banking awards are taxable income, taxed as 'other' income. They are not classed as bank interest and do not count towards the personal savings allowance.  

The accounts where the customer receives 'cash back' as a result of purchases made, is not taxable.

Thank you.

Thank you HMRC Admin 5 That is crystal clear

Hi, I have credit card (not bank account) with Cashback reward as a results of purchases made. According to your earlier comment, this is not taxable? Thanks

Hi JCC,

Some bank accounts pay a loyalty reward each month to the account holder. These banking awards are taxable income, categorised as 'other' income. They are not classed as bank interest and do not count towards the personal savings allowance. However  'cash back' paid to a customer as a result of a purchase made is not taxable.

Regarding the point about two Direct Debits being similar in nature to a cashback scenario. We would direct you to SAIM8050, which in example 3 confirms that each cashback payment represents a one off rebate of amounts that individuals have paid to the card issuer. This is different to rewards relating to accounts with two Direct Debits.

SAIM8030 refers to Annual Payments in case law and says “The concept of pure income profit was considered in the case of The Commissioners for HM Revenue and Customs v Hargreaves Lansdown Asset Management Ltd: [2019] UKUT 0246 (TCC). This case involved payments of commission (described as bonuses) to investors by an investment fund platform. The decision confirmed that the payments were pure income profit and therefore taxable as annual payments. The relevant case law on annual payments has not changed for many years and this case confirms that the principles arising still apply when considering whether or not a payment is an annual payment.” There will always be a reason why someone is in receipt of an annual payment, such as maintaining two Direct Debits or, as in the case cited in the guidance, investing in a specific fund. The fact that there maybe stipulations to a reward does not mean that it is not an annual payment or pure income profit.

Thank you.

Hi Please can I ask a question on this topic. You have clearly outlined the position as to "loyalty rewards" and "cashback" above, where you have said: "Some bank accounts pay a loyalty reward each month to the account holder. These banking awards are taxable income, categorised as 'other' income. They are not classed as bank interest and do not count towards the personal savings allowance. However 'cash back' paid to a customer as a result of a purchase made is not taxable." This year myself and my partner received 2 x £100 "Nationwide Fairer Share Payments". These are payments made by Nationwide to members who hold savings accounts, current accounts and/or mortgages with Nationwide (and meet a few conditions). This to me would seem to meet the criteria of being a "loyalty reward" and would therefore be taxable, but would not count towards the Personal Savings Allowance. I am confused however that Nationwide have said that these payments count as "savings interest" and would count towards the Personal Savings Allowance. . Please could you advise whether Nationwide are correct, as what they have said seems to contradict with the advice you have given above. Many thanks

Hi,

This payment is taxable as interest. Please check the terms and conditions for your fairer share payment.

Nationwide Fairer Share Payment Terms and Conditions

Thank you.

Thank you for your reply but what you seem to be saying is that because Nationwide say it’s interest, then it’s interest? Even though the payments are set amounts, not based on a percentage of the amount of capital you hold with them (as interest normally is), and is even paid even if you only have a Nationwide mortgage on which interest is not paid to the holder (rather the holder pays interest to the lender). Seems very odd. Surely all the banks could do this - they could just decide that all loyalty bonuses (annual payments) were “interest” and that they therefore formed part of a taxpayers PSA by simply putting it in their T&Cs?

Hi AnnieBee,
This is classed as an interest payment and is to be included with other interest you receive.
This will be taxable if you exceed the personal savings allowance.
Thank you. 

Hi, If the reward is from foreign bank, how should I report that in my self assessment to HMRC please? Thanks.

Hi, Halifax pay a monthly reward based on spending at least £500 on their debit card. Is that cashback or annual payment?

Dear HMRC Administrators, From what I've been able to gather based on your response above, the £5/month reward given to Barclays Blue Rewards customers would be considered taxable income (under the 'other income' category) even though it says on the Barclays website that it isn't. Please can you clarify if this would count as taxable income if the account is held for less than 12 months? And would these rewards be exempt from taxation if the total 'other'/ miscellaneous income earned (including the rewards) is under £1000 in any tax year? Many thanks in advance for your reply.

Hello, I'm just following up on my earlier message. Thank you.

Hi Tony Owen,
Please have a look a the guidance and examples here:
SAIM8050 - Annual payments: examples
Thank you. 

 

Hi vmio5188

Please refer to SAIM8020 - Annual payments: meaning of annual payment

Thank you

Hi MeMe2023 MeMe2023
The reward income is taxable income no matter the amount received. It doesnt qualify to be exempt under trading allowance or property allowance as it is not this type of income.