HMRC has appealed over Hargeaves Lansdown's ‘discount tax’ following the first tier tribunal finding in favour of the wealth management firm earlier this year.
In March, the tribunal found that the firm’s loyalty bonuses were not taxable, which at the time Hargreaves Lansdown said would result in at least £15 million being returned to 150,000 investors.
The loyalty bonus, which provides a discount on a client’s management fees, had been introduced over 15 years ago, and the firm had consulted with HMRC on the tax status of the bonus. Then in 2013, HMRC changed its mind over the bonus and declared that rebates of annual charges (such as loyalty bonuses) paid on funds held outside ISAs or SIPPs should be taxed as income and paid net of basic rate tax.
Hargreaves Lansdown took the case to the tribunal and Chris Hill, chief executive, said that given it had won the case at the tribunal he sees “no reason why we would not be successful at appeal”. He said the attempt by HMRC to tax the loyalty bonus “has always been an unnecessary and unwarranted attack on private investors.”
The appeal is expected to complete in the first half of 2019. In the meantime, the firm will continue to pay loyalty bonuses with the 20 percent deduction for the “discount tax”. In a statement it told clients they should “continue to include loyalty bonuses as income on their tax returns for the time being.”