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HMRC internal manual

Business Income Manual

Specific receipts: insurance and other commission: deduction for commission passed on to customers

It is becoming common for brokers and agents to share commission with their clients, and for financial institutions, retailers and manufacturers to offer cash backs to customers buying goods, investments or services.

Statement of Practice SP4/97 paragraph 17, reproduced below, sets out the circumstances in which commission passed on to a customer is deductible in computing trading profits:


  1. Commission etc passed on to a customer, or otherwise forgone in the circumstances described in paragraph 13 above, as an inducement to enter into a transaction is deductible if it is laid out wholly and exclusively for the purpose of the trade or profession. The statutory test is very likely to be satisfied if the customer required the commission to be passed on as a condition of entering into the transaction or if the transaction was one between independent parties acting at arm’s length.’