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HMRC to rethink stance on Isa rebates after RDR

HM Revenue & Customs is redrafting its guidance on the tax treatment of Isas following the RDR, after Money Marketing questioned its position on trail commission.

Last week, HMRC published its latest Isa bulletin, which sets out the treatment of adviser commission rebated back to Isa customers post-RDR.

It says if a rebate is paid in additional units invested in the Isa, this will not count as a new subscription and therefore will not count towards annual Isa subscription limits.

Where commission is rebated back to the client’s non-Isa cash account and then invested into the Isa, this will count as a new subscription.

But the bulletin also says: “Where an adviser chooses to give up trail commission he has earned for pre-RDR advice so that he can have a single remuneration agreement with the customer, the payment is from the adviser to the customer, so this would count as a new Isa subscription and would count towards the annual Isa subscription limits.”

When asked by Money Marketing to clarify the statement, HMRC could not provide an explanation of how giving up trail commission would result in money being rebated to the client.

Money Marketing understands HMRC is now revising the text. HMRC declined to comment.


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. ??????? What on earth does Money Marketing know about tax? I presume that it is just poor reporting to say “HMRC could not provide an explanation of how giving up trail commission would result in money being rebated to the client” when I would would hope that the causality between ‘give up commission’ and ‘client receives amount equal to commission’ and ‘equals rebate’ would be reasonably obvious to most people. Unfortunately that is a red herring and not the real issue. I’m sure that HMRC is most grateful to Money Marketing for help[ing to muddy the waters even further!

  2. Stan – For once I disagree with you. The waters now are a bit muddy and we have to ask the questions now otherwise the waters will still be muddy on January 1st 2013. Well done HMRC for trying to clarify and well donce MM for the same….
    It’s a pity the FSA doesn’t engage in the same way. Come on Rory and Peter Smith, engage with the industry publicley and help form opinion rather than dictate rules. HAVE an opinion, including a personal one on teh longstop and express it (for or against) whoever you work for.

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