How could I label this expense?

Hi, I'm considering starting a new business in which I receive a fee/commission from a company (e.g. £20) if I arrange/refer a new customer to them. I would then share some of this with the customer so I take £20 from the company and forward £10 to the customer. The £10 is an marketing expense on my part and not profit, how would I label or keep record of this? Please note the above is just an example scenario and made up figures.

Hi newluke16,

The initial payment is classed as part of your income and the money you then give to the customer would be miscellaneous expenses.

Thank you.

Just to clarify, I'll only pay income tax on the £10? As I would have received £20 from the company, but paid £10 to the third party/customer as agreed and classed as a miscellaneous expense. Thank you

I am a self-employed music teacher, and teach from home in the afternoon and evening. I use the morning for lesson prep and other admin. I am considering subscribing to in.flow.club to use as a body double during this admin time to help me to stay focussed. I do not use in.flow.club for personal time. If I were employed then I would expect my employer to pay the subscription fee as a reasonable adjustment under the Equality Act. Therefore I assume that this would be an allowable business expense, but I can't see anything like this listed on your help pages. Would it be classed as "Wages, salaries and other staff costs", or perhaps "Other allowable business expenses"? Thanks.

Hi newluke16

You would be taxed on what you are paid, minus your expenses. 

Thank you

My question is how would I record this expense, and as what? It's essentially a cashback/discount. Although at arms-length as the customer did not pay me directly. I'll keep a copy of the transaction cost via bank transfer along with the customers information.

Hi,

This could come under computer software, which would be declared under 'stationery'.  

Expenses if you're self-employed

You would also need to consider the 'wholly and exclusively', in the performance of your duties.  

BIM37400 - Wholly and exclusively: case law: incidental benefit

Thank you.

Did you respond to the wrong post, HMRC Admin 32?

Hi newluke16,
"BIM1100210 advises "
A cash-back received in the course of trading is a receipt of the trade to be included in taxable trade profits"".
You would include this in the gross turnover"
BIM100210 - Miscellaneous income: particular sources: cash-backs
Thank you. 
 

I am in practice. In both these cases you put them under "Phone, fax, stationery and other office costs. New Luke-it is not a cash back. It is commission.

Hi newluke16,

That is the correct answer.  

You would declare the full commision on the self employment section of your tax return as part of your gross turnover and claim expenses for the payment made to the new client.

Thank you.