Loyalty / Commission & Vouchers =Receipts

lisajayne1lisajayne1 Registered, MAAT, AAT Licensed Accountant Posts: 46
Hello

Just to clarify the situation on commission and loyalty receipts. Are these taxable income?

Also I have a client who is giving away £5 vouchers for every £50 spent. How is this accounted for? I appreciate the £5 is an expense but is the credit entry against sales? and if so are these sales taxable as technically there is no income from it?

Many Thanks

Comments

  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,448
    What if the customer never spends the £5 voucher?
  • lisajayne1lisajayne1 Registered, MAAT, AAT Licensed Accountant Posts: 46
    Thank you. I was wondering if maybe it would become an accrual in the balance sheet??
    Also the commission Loyalty ?? are these a tax free income?
  • lisajayne1lisajayne1 Registered, MAAT, AAT Licensed Accountant Posts: 46
    Sole trader. Loyalty is for using a card machine .. Commission was just thrown in as wondered if it was in the same bracket!! The vouchers are considered a sale I guess! Just wondered about the fact there was no monetary gain, so what are the tax implications?? Either for sole or ltd companies.
  • lisajayne1lisajayne1 Registered, MAAT, AAT Licensed Accountant Posts: 46
    It was the £5 voucher that I had considered in the balance sheet.
  • lisajayne1lisajayne1 Registered, MAAT, AAT Licensed Accountant Posts: 46
    Yes it does. Setting the loyalty receipts against the expense in not something I would have thought of. So thank you for that advise.

    With regards to the vouchers. I appreciate the idea of a discount, however in sage I believe the discount is bundled together with sales (in addition) however I'm not 100% sure of this.
    I'm guessing that when the tax computation is completed the discounts are removed from this bundle?!?!?
    I have read back my own post and although it's clear in my head it's not that clear on here, so apologies for that.
  • lisajayne1lisajayne1 Registered, MAAT, AAT Licensed Accountant Posts: 46
    Just an update.. I received the following advise re: vouchers

    The voucher cost would be set as deferred income & once the voucher is used set against the deferred income ... However would it be a taxable income?
  • CeeJaySixCeeJaySix Well-Known Registered Posts: 645
    As there's no money changing hands for the voucher - it's given as a reward/discount rather than sold as a gift voucher - the problem with treating as deferred income is that if it's never cashed in it will sit on the balance sheet forever (unless they have an expiry date - if there's a system for tracking individual vouchers you can recognise in sales as soon as they expire). If you go this route presumably the debit at the point of issue will be a discount allowed or in CoS - meaning a tax deduction now. In this case, yes, when the voucher is spent and released from deferred income, it will be taxable income.

    You have two options - recognised £50 as sales now and treat the voucher as a discount in the future when it's used as mrme suggests, or recognise £45 sales with £5 deferred now, and recognise the £5 as revenue when the voucher's cashed - the key question is how likely the voucher is to be cashed in the future to determine whether or not the liability should be recognised now, and how material the total value of all the vouchers still valid in issue are.
    lisajayne1
  • lisajayne1lisajayne1 Registered, MAAT, AAT Licensed Accountant Posts: 46
    I really do appreciate your response thank you
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