Is business bank cashback taxable for a limited company?

Short version. Yes. Cashback and rewards a company receives on its business banking are taxable, even though similar rewards on a personal account usually are not. What changes is how you record them: cashback earned on business spending reduces the expense it relates to, while a standalone reward such as a switching bonus is income. Either way your Corporation Tax comes out right, and neither belongs in turnover.

1. The short answer

A limited company is taxed on its profits, and a receipt connected with the business increases those profits whatever the bank calls it. So the question is rarely whether cashback is taxable, but which of three treatments applies:

• Cashback earned on spending is a rebate. Deduct it from the cost it relates to.
• A standalone reward, such as a switching or joining bonus, is income with no expense to net against.
• A return based on your balance is interest, whatever the marketing calls it.

Sections 2 to 4 take each in turn, and section 7 shows exactly where each one goes in your filing.

2. Cashback on business spending

This is the common case: a business card or account that pays back a percentage of what you spend, or a rebate on charges you have paid. HMRC has treated this kind of cashback as a discount on the original spending for many years, and the accounting follows the same logic. Reduce the expense the cashback relates to rather than recording income.

A company spends £4,000 on materials and receives £40 of cashback on that spending. Record cost of materials of £3,960. Your profit, and therefore your tax, is the same as if you had recorded £4,000 of cost and £40 of income, but your figures now say what actually happened.

3. Switching and joining bonuses

Banks often pay a fixed amount for opening an account, switching to them or paying money in. Nothing was bought, so there is no expense to reduce. For a company this is simply taxable income.

The amount is usually small, but the treatment matters because it is the case people most often get wrong. It is not turnover, because the company did not sell anything. It is not interest, because it was not worked out from a balance. It belongs in the miscellaneous income box of your Corporation Tax return, box 205.

4. Rewards that are really interest

Some accounts pay a reward calculated from your balance, an interest rate or how long money stays deposited. That is interest, however it is labelled, and it belongs with your other interest received rather than with cashback. It reaches your return through a different box (170) and is treated as loan relationship income.

A useful test: if paying in twice as much, or leaving it twice as long, would have changed the amount, treat it as interest. If the amount was fixed by the promotion whatever you did, it is a reward.

5. Why personal accounts are different

A great deal of published guidance says bank switching bonuses are tax free. That guidance is about individuals, and it is correct for them: a personal switching incentive is generally not taxable income for the person who receives it.

Companies are taxed under different rules. A receipt connected with the company’s business is part of its profits, so the same bonus paid into a business account is taxable even though the personal version is not. Applying personal-account guidance to a company account is the most common mistake we see on this topic.

6. Cashback on a personal card

If the reward was earned on a director’s own card or personal account, it belongs to the director, not the company, even when the spending was for business and was later reimbursed. It is not company income and does not go on the company’s return. So the first question to ask about any cashback is whose card or account earned it.

7. Where each one goes in your filing

• Cashback on business spending: reduce Administrative expenses, or Cost of raw materials and consumables if the spending was stock or materials. Nothing else to enter.
• A switching, joining or other fixed reward: enter it in Income not falling under any other heading, which files in box 205 and appears within Other income in your accounts. Add a short description of what it was for.
• Interest, or a balance-based return: enter it in Interest receivable and similar income, which files in box 170.
• Anything earned personally: leave it off the company return entirely.

For the mechanics of box 205 and what else belongs there, see other income on your CT600.

8. If you are not sure

If you cannot tell which of these a payment was, send us the details through support: who paid it, how much, how it was worked out, and whether it related to particular spending. We will confirm the right treatment before you file.

This article is general guidance, not tax advice. If your situation is unusual, speak to an accountant or contact us before filing.