Mortgage cash-backs will escape tax net

The cash-backs borrowers receive on special mortgage deals are definitely not liable to capital gains tax, nor are customer rebates on the list price of cars, the Inland Revenue admitted this week after taking advice from its lawyers.

Any taxpayers who have been charged CGT on their cash-backs should contact their tax office to establish how the assessment and any appeal will be dealt with.

Tax accountants welcomed the change of heart, but Chris Williams, tax specialist at Pannell Kerr Forster complained yesterday that the timing of the announcement left investors very little time to make use of the concession by selling other assets to make full use of their annual allowance of pounds 6,000 worth of tax-free capital gains before the end of the current tax year.

The Revenue will shortly publish guidance on circumstances where cash- backs could be liable to income tax, but this is more likely to apply to cash-backs received by motor traders. It is unlikely to affect building society borrowers many thousands of whom have received cash-backs in the last 12-18 months.

The Inland Revenue has also clarified the tax treatment of windfall payments building society members receive for approving mergers, takeovers and conversions of their societies from mutual to banking status. Members who receive a cash bonus for approving the merger of two building societies which remain mutuals do have to pay income tax on the windfall.

The last such payment was to members of the North of England BS when it was merged with the Northern Rock 18 months ago. The Inland Revenue admitted however that there is no mechanism for requiring societies to deduct tax at source before making the payments, and investors are expected to declare the bonuses voluntarily.

If a society converts into a bank, or is taken over by a bank or some other non-mutual organisation however, the cash and/or shares members receive as a result will be regarded as capital gains not income.

Even cash payments will be regarded as a capital gain and will not be liable to income tax. Shares received as part of a conversion or takeover will become potentially liable to capital gains tax but only if the proceeds exceed the tax-exempt allowance if and when the shares are sold.

Pannell Kerr Forster believes the Inland Revenue can still be challenged on its ruling, however. Investors are advised to declare such payments on their tax forms, and then challenge any tax which is charged against them.

The Inland Revenue's latest ruling made no mention at all of the loyalty bonuses recently awarded to members by the Britannia Building Society for remaining loyal to a society which does not plan to merge or convert.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
News
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
TV
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
News
Amazon misled consumers about subscription fees, the ASA has ruled
news
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn