Tuesday 10 September 2013

Hargreaves Lansdown Challenges HMRC's Discount Tax


In March I noted that as from 6 April 2013 fund investors face paying income tax on "loyalty bonuses" paid by fund supermarkets, after HMRC ruled that the payments are "annual payments" and should therefore be taxed as income.

Hargreaves Lansdown (the UK's largest fund supermarket) has taken advice from counsel and decided to challenge HMRC's "discount tax", as the tax threatens their ability to pay loyalty bonuses and offer discounts on fund charges.

Chief executive Ian Gorham is quoted by Citywire:
"The introduction of the 'discount tax' was extremely disappointing news and an attack on the small investor. The 'discount tax' is anti-competitive. Loyalty bonuses have been hugely popular with investors and helped them save money on investing in their favourite funds.

We feel it’s important to take a stand on behalf of investors. When we introduced loyalty bonuses we consulted on its tax position and it was clear, as a refund of charges, it should not be subject to taxation."
Hargreaves Lansdown believes that it has saved investors over £1 billion in discounts and loyalty bonuses.

The legal challenge, unsurprisingly, is expected to take several months. The tax due to HMRC is being held in a fund while the issue is resolved. If Hargreaves Lansdown loses, the money will be paid to HMRC otherwise it will be returned to its clients.


Tax does have to be taxing.

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