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HMRC internal manual

Capital Gains Manual

Incentive payments by financial institutions: cashbacks: background

Many of these offers are made by building societies or other financial institutions under what are known as ‘cashback’ schemes. These are inducements to attract potential customers to the society or institution. Similar offers may be made by other types of business to induce customers, for example to purchase cars or other consumer goods.

These typically involve the financial institution offering a prospective borrower the inducement of a cash payment, the cashback, to borrow money in the form of a mortgage. The cash being payable to the borrower when the mortgage is taken out.

The cashback will normally be calculated as a percentage of the mortgage up to an overriding maximum and will be offered to the borrower on the basis that they:

  • take out a loan
  • secure this by completing the society’s mortgage deed

within a specified period.

If these requirements are satisfied, the cashback payment will then be paid over normally in the form of a single lump sum.