Big changes to the Capital On Tap SME payment cards – no more Avios from paying tax to HMRC

EDIT:  This article is now out of date.  Capital On Tap has relaunched with just one Avios card, Business Rewards, which is better than both of the cards described below.  Click here to read our review of Capital On Tap Business Rewards.  We still have a higher sign-up bonus for our readers!

Some important changes have been announced to the Capital On Tap Mastercard payment cards, which allow small businesses to indirectly earn Avios via a small business Mastercard.

The Capital On Tap cards have been very popular with HfP readers who own their own businesses.  As well as the obvious benefits of being able to indirectly earn Avios at a generous rate (0.5 Avios per £1 or 1 Avios per £1, depending on which card you took), there was another quirk.

Because the Capital On Tap cards are technically prepaid Mastercards, they can be used to pay HMRC without incurring any fees.  This has allowed SMEs to rack up tens or even hundreds of thousands of Avios by paying their VAT, tax and PAYE bills via Capital On Cap.

But then Brexit came along …..

My understanding is that the underlying issuer of the Capital On Tap cards is an EU institution.  This means that, given how the political situation currently looks, Capital On Tap would have serious issues continuing to operate beyond 31st October.

There is a simple solution to this problem.

From 1st September, new applicants for Capital On Tap cards will receive a standard corporate credit card.  The issuer will switch from Mastercard to Visa.

Existing cardholders will receive a new card in the post over the next few weeks, and the existing Mastercard products will stop working on 31st October.

As I understand it, all card benefits remain the same.  The sign up bonuses remain the same, the annual fee remains the same, the points you earn per £1 spent remain the same.

There is one change though.

The cards will no longer be treated as debit cards.  This means from 31st October they can no longer be used to pay HMRC for free, or to pay any other institution which only accepts debit cards.

Techinically, you can still pay HMRC with Capital On Tap because HMRC accepts corporate credit cards.  However, you will be charged a credit card fee and this is too high to justify the Avios you will indirectly earn.

The good news is that you should still be able to make your Quarter 3 VAT payment before your Mastercard is closed.  You could also make a prepayment towards your next Corporation Tax bill.  This should allow any HFP reader who has not yet triggered their sign-up bonus to generate enough qualifying spend.

Are the Capital On Tap cards still worth using?

For your existing card year, absolutely.

As you’ve paid your annual fee, you might as well keep on using the card for non-debit card transactions.  You won’t beat the indirect Avios earning rate of 0.5 Avios per £1 or 1 Avios per £1 from any other Visa or Mastercard.

When your card comes up for renewal, you will need to do the maths.  Look at how much credit card spend you can still put through it, work out how many Avios you will earn, look at the annual fee and decide if it makes sense.

For small businesses which make substantial volumes of Visa and Mastercard payments, the cards are still a great choice.  Remember that you can have up to 20 supplementary cards to give to your staff.

A reminder:  this is how the Capital On Tap cards work

The rest of this article is a reminder of how the Capital On Tap cards work.   You will receive points worth 5,000 Avios or 20,000 Avios as a sign-up bonus.  There is an extra bonus for Head for Points if you use the promotional code below.

In theory, if you apply now, you should receive the Mastercard and be able to get two months of use from it before you are forced to use the new Visa corporate credit card.  This is obviously a bit messy, however, so I am not wholeheartedly recommending it UNLESS you know you can continue to use the card when it switches to a Visa credit.

What is Capital On Tap?

Capital On Tap is a niche payments group which offers two small business Mastercards which indirectly earn Avios – and we have negotiated a higher sign up bonus for our readers.

The Capital On Tap cards are aimed at SMEs and sole traders.  Whilst you may not have heard of Capital On Tap, it already has 50,000 customers for its existing ‘no rewards’ payment card.  These cards are their first move into the rewards market.

Capital On Tap is the answer for all of the people who have emailed me in search of a good travel rewards card for their business purchases.

You can find full details on their website here.  Read on first, however, to learn more about the additional bonus for HfP readers.

Capital On Tap offers two cards for SMEs which indirectly earn Avios

The company has launched two products.  One is aimed at lower spenders and one is aimed at those who can put substantial sums through the card.  In summary:

Card 1 – ‘Capital Club’

There is a sign-up bonus which converts to 5,000 Avios, with an on-going earnings rate which converts to 0.5 Avios per £1.  The annual fee is £99 (tax deductible).

Card 2 – ‘On Tap Club’

There is a sign-up bonus which converts to 20,000 Avios, with an on-going earnings rate which converts to 1 Avios per £1.  The annual fee is £249 (tax deductible).

Both sign-up bonuses require you to spend £5,000 within three months.  The bonus arrives at the end of your fourth billing period, irrespective of how quickly you spend the £5,000.

Another positive point is that Avios transfers from Capital On Tap are INSTANTANEOUS.  Log in to Capital On Tap, request a transfer of some or all of your available Capital On Tap points to Avios, log in to your British Airways Executive Club account and they will be there.  Capital On Tap is the only UK Avios partner to offer instantaneous transfers.

And an extra bonus for Head for Points readers

Head for Points readers get an extra sign up bonus equivalent to 250 Avios with ‘Capital Club’ (total equivalent to 5,250 Avios) and 500 Avios with ‘On Tap Club’ (total equivalent to 20,500 Avios).

Interest rate information:  Your interest rate is based on your business profile and can be as low as 9.9% APR.  The standard interest rate for marketing purposes is 39.9% APR.

You can find full details of both cards – and apply – on their website here, but this does not reflect the switch to a Visa credit card from 1st September.  Read on first, however.

Who can apply?

The Capital On Tap cards are aimed at sole traders as well as small businesses.  The company appears to be flexible in who they accept:

if you are a UK limited company or limited partnership with turnover of £24,000+ then you should be eligible

if you are a VAT registered sole trader then you should be eligible. 

if you are a sole trader under the VAT threshold but above £24,000 then applications are looked at on a case by case basis – if you have a functioning website and are clearly in business then I am told you should be eligible

Applicants must not have a CCJ against themselves or their business in the past 12 months.

The current Mastercard version is not a credit card.  They are structured as a prepaid Mastercard which is funded by Capital On Tap.  As far as I can see this doesn’t make any difference to your legal rights, as Section 75 protection does not apply to business credit cards.  In the event of any disputes over purchases, you request a Mastercard chargeback.

From 31st October, the Mastercard will stop working and you will need to use the replacement Visa corporate credit card.

How do the two Capital On Tap cards compare?

Here is a summary of the two Capital On Tap products.

Whilst I quoted the earning rates above in terms of Avios, you are actually awarded ‘Capital On Tap points’.  These can be converted into Avios or exchanged for cash.

Confusingly, the transfer rate between Capital On Tap points and Avios points differs between the two cards.

The £99 per year ‘Capital Club’ card offers:

10,000 Capital On Tap points for signing up and spending £5,000 within three months

1 Capital On Tap point per £1 spent

A 2:1 conversion rate into Avios so the sign-up bonus is worth 5,000 Avios and the on-going earning rate converts into 0.5 Avios per £1

15 free supplementary cards for your staff

No FX fees and no ATM fees 

500 bonus points (250 Avios) if you use code headforpoints when applying

The £249 ‘On Tap Club’ card offers:

20,000 Capital On Tap points for signing up and spending £5,000 within three months

1 Capital On Tap point per £1 spent

A 1:1 conversion rate into Avios so the sign-up bonus is worth 20,000 Avios and the on-going earning rate converts to 1 Avios per £1

20 free supplementary cards for your staff

No FX fees and no ATM fees 

500 bonus points (500 Avios) if you use code headforpoints when applying

Do you really need a dedicated business Mastercard for your company?

Some sole traders, including myself, use a personal credit card for their business expenses.  A lot of self employed people – or their accountants – are not happy doing this, however, and it is clearly not sensible to give personal credit cards to your staff.  You need a dedicated business payment card in these circumstances.

Until now, if you wanted to earn rewards from a small business payment card you were reliant on American Express Gold Business or American Express Platinum Business.  These are good products but obviously have issues over Amex acceptance, especially with small suppliers.

The Capital On Tap Mastercards are small business cards that can be used everywhere that Mastercard is accepted.

Which of the two Capital On Tap cards should I get?

You need to look at the maths based on what you spend, including how much you spend in foreign currencies (the card has no FX fees).

The £99 or £249 annual fee is a tax deductible expense so the net cost to you will be lower.  In Year 1 you are getting a sign-up bonus which converts into 5,000 Avios (£99 card) or 20,000 Avios (£249 card) respectively.

Using the special headforpoints promo code increases your bonus by 500 Capital On Tap points so the sign-up bonus converts into 5,250 Avios or 20,500 Avios respectively.

Day to day you are collecting the equivalent of 0.5 Avios per £1 spent (£99 card) or 1 Avios per £1 spent (£249 card).  If you and your staff have a high level of business expenditure then this could work out very nicely for you.  Remember that you can have 15-20 free supplementary cards.

For Year 1, I think there is a very strong case for getting the £249 ‘On Tap Club’ card.  The sign-up bonus converts to 20,000 Avios – which offsets most of the after-tax fee – and then you are picking up the equivalent of a lucrative 1 Avios per £1 after that.

For Year 2+, you need to look at what you are spending.  If you value an Avios point at 1p, the crossover point at which the £249 ‘On Tap Club’ card earning the equivalent of 1 Avios per £1 is the best choice is roughly £30,000.  If your annual spend is under £30,000 you may want to trade down to the £99 ‘Capital Club’ card and earn the equivalent of 0.5 Avios per £1.

But don’t forget …..

Capital On Tap points can be converted into cashback as well as Avios.  You can choose to take 1p of cash instead of 1 Avios.

If you don’t value Avios at more than 1p (and in most scenarios you can get more than 1p for them as this article shows) then take your Capital On Tap points as cashback instead.

You should also talk to your accountant about the tax consequences of taking cashback instead of Avios.

Remember to use our Capital On Tap promo code when you apply

If you do decide to apply now before the card is switched to the new Visa credit card, you can find out more and apply on their website here.

Remember that the Mastercard debit card will only be valid until 31st October and at that point you will need to use the new Visa corporate credit card version which you will be sent nearer the time.

Don’t forget to add promo code headforpoints to receive the extra 500 points as a sign-up bonus.

Disclaimer: Head for Points is a journalistic website. Nothing here should be construed as financial advice, and it is your own responsibility to ensure that any product is right for your circumstances. Recommendations are based primarily on the ability to earn miles and points. The site discusses products offered by lenders but is not a lender itself. Robert Burgess, trading as Head for Points, is regulated and authorised by the Financial Conduct Authority to act as an independent credit broker.