Specific receipts: insurance and other commission: sums to which trader is entitled
Statement of Practice SP4/97 paragraph 14 (see BIM40655) explains that a trader becomes entitled to commission and a taxable trading receipt will arise, where commission or a cash-back is:
- netted off (meaning that the trader’s entitlement to commission or a cash back is set off against the obligation to pay the full purchase price for goods or services so that only the net amount is paid), or
- invested or applied in some way for the benefit of the trader.
Where there is no entitlement to commission or a cash back, a taxable trading receipt will not arise even if:
- the trader pays a discounted purchase price,
- extra value is added to the goods, investments or services obtained by the trader for the purchase price.