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HMRC to appeal ‘loyalty bonuses’ ruling after Hargreaves victory

HM Revenue and Customs will go back to court with Hargreaves Lansdown as it appeals a multi-million pound judgement on loyalty bonuses for investors.

In March, Hargreaves successfully defended its position over the so-called “discount tax”, arguing that rebates of annual charges, such as loyalty bonuses, paid on funds held outside Isa or Sipps should be allowed to be passed back to investors tax-free.

HMRC changed its rules on returning discounts in April 2013. Hargreaves had been paying loyalty bonuses for at least 15 years before this, but they would now be taxed as income and paid net of the basic rate tax, and would have to be declared on tax returns.

Hargreaves has postponed all payments while the tax position is clarified.

Hargreaves claimed it would be able to collectively return £15m to around 150,000 investors as a result of the ruling, but HMRC has now decided to appeal the March tribunal judgment.

The latest news, views and analysis on tax developments from Money Marketing

The appeal is now due to run until the first half of next year.

Hargreaves Lansdown chief executive Chris Hill says: “The discount tax has always been an unnecessary and unwarranted attack on private investors…We see no reason why we would not be successful at appeal.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 16th May 2018 at 9:25 am

    Why doesn’t the FCA challenge HL’s practice of imposing exit charges on all their investment accounts? Or, indeed, that of SJP on their Investment Bonds (despite David Bellamy, in an interview with Money Marketing, having claimed to have abandoned them as long ago as 2013?)?

    https://www.sjp.co.uk/wealth-management/investment-planning/charges (Copyright St. James’s Place © 2018) states “There will [also] be an annual product management charge of 1% but this will be waived in the first 6 years for each investment. If you encash within the first 6 years of an investment there will be an early withdrawal charge of 1% of the value of your fund in respect of this investment.” But even that is rather less than absolutely “clear, fair and not misleading” (in fact, decidedly the opposite), because the early withdrawal charge is 1% for each year short of 6.

    Bellamy’s statement directly contradicted what SJP publishes in its own website. Why didn’t MM challenge him on this point?

  2. David Cathcart 16th May 2018 at 11:25 am

    Lets look at this another way, an investor is paid an amount of money from HL, irrespective of of where it originated. I the old days if this was a rebate of commission then this would be taxable in the hands of the clients – so what is so different about this. Why do HL not just reduced provides to reduce the the annual charges. We all know why this is but that is a discussion for another day and something that MM should question HL about

  3. David Cathcart 16th May 2018 at 11:26 am

    sorry awful spelling and grammar, in too much of a rush

  4. This affects the whole platform industry, not just HL. For more than a decade and a half, HMRC accepted that fund rebates to clients were not income. Then they suddenly changed their mind at exactly the same time that the FSA said they would ban all rebates, whether to the platform or client (a real ‘shoot yourself in the foot’ moment). The result has been the whole multi share class mess. The FSA belatedly relented. In order to encourage reduction in fund fees whilst avoid more share class proliferation, we really need a return to fund discounts!

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