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HMRC rules rebates to investors are taxable

HMRC Letter 480

HM Revenue & Customs has ruled all rebates from asset managers to investors will be subject to income tax from next month.

Money Marketing reported in December that HMRC was looking at the tax treatment of rebates, causing delays to the FSA’s forthcoming platform paper.

There was an expectation within the industry that these payments would be taxed.

HMRC confirmed on Monday that cash and unit rebates paid from 6 April 2013 will be taxed at the investor’s marginal rate although the decision will not be retrospective.

Basic rate taxpayers will have the tax deducted from the payment while higher-rate taxpayers will have to account for the extra tax due in their self-assessment form.

A HMRC spokesman was unable to confirm how much extra tax revenue would be raised as a result of the decision.

HMRC says it acknowledges the logistic challenges of introducing the new regime from April for the fund groups making the payments, less than two weeks after the announcement was made.

It will accept an approximation of the tax deducted at source up to the end of 2013 “provided that this is as accurate as reasonably possible”.

Payments through Isas will not be taxable or count towards the annual Isa allowance, including rebates from an Isa investment passed into a separate cash account, as happens with some platforms.

Sipp payments made to the Sipp and reinvested will not count as new member contributions.

Thomas and Thomas Financial Services managing director Darren Lloyd Thomas says: “The frustration for advisers is that it is ever so hard to have your right proposition in place with the constant changes.

“It feels a bit like playing pin the tail on the donkey, with a moving donkey.”


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